Chartered Investment Manager (CIM) Practice Exam · Question
Which of the following private equity fund types typically provides capital to mature companies for restructuring, acquisitions, or market expansion, often involving a significant amount of debt financing?
Leveraged Buyout (LBO) funds are characterized by their use of a substantial amount of borrowed money (leverage) to finance the acquisition of other companies.
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Question: Which of the following private equity fund types typically provides capital to mature companies for restructuring, acquisitions, or market expansion, often involving a significant amount of debt financing?
Answer options:
- Venture Capital
- Growth Equity ✅ Leveraged Buyout (LBO)
- Distressed Debt
Correct answer: Leveraged Buyout (LBO)
Explanation: Leveraged Buyout (LBO) funds are characterized by their use of a substantial amount of borrowed money (leverage) to finance the acquisition of other companies. The acquired company's assets often serve as collateral for the borrowed funds, aligning with the description.
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