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Basic Question 4 of 6
In a LBO buyout, which components are the most sensitive to the level of the exit?
II. Preference shares
III. PE equity
IV. Management equity
I. Debt
II. Preference shares
III. PE equity
IV. Management equity
User Contributed Comments 7
| User | Comment |
|---|---|
| poomie83 | Could someone explain why this would be the case? |
| tankdan | Redundancies: LBO Buyout, PE equity.... |
| ericczhang | Debt and preferreds are claims on fixed payments, do they don't participate in gains on higher equity exits. But PE and management equities directly participate in gains upon exit because they sell their shares. |
| johntan1979 | Keywords: most sensitive |
| jorellana9 | this question is worded awfully vague. I think "level of exit value/enterprise value" would have been a lot more effective |
| khalifa92 | i still dont get the question |
| thevinu | dont preference shares get payouts upon lbos as well? |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
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Learning Outcome Statements
compare and contrast public and private equity securities
CFA® 2025 Level I Curriculum, Volume 3, Module 4.