- 6 Marks
AFM – Nov 2016 – L3 – Q4b – Financial strategy formulation
Discuss three advantages and three disadvantages of ABC Ltd being acquired in a leveraged buyout (LBO).
Question
ABC Ltd is a listed company that operates in the Information Technology industry. The company has been experiencing losses for several years now, and its reserves are fast depleting. Its earnings per share have been negative for the past three years. A team of the company’s largest shareholders and some managers are considering acquiring the company in a leveraged buy-out (LBO).
Required:
Discuss THREE advantages and THREE disadvantages of ABC Ltd being acquired in an LBO.
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