Key Expectations in Leveraged Buyouts

Easy Private Equity Valuation Leveraged Buyouts

In a Leveraged Buyout (LBO), a private equity firm acquires a target company primarily using debt. The aim is to increase the target company’s value and eventually sell it for a profit. Which of the following statements best describes a key expectation of value creation in an LBO?

The private equity firm expects to realize gains primarily from the 'multiple expansion' of earnings.

The private equity firm anticipates significant operational improvements within the company post-acquisition.

The private equity firm relies mainly on tax shields from debt to enhance investment returns.

Hint

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