For LBO transactions with a private equity firm as the Buyer, the definitive purchase agreement would typically obligate the Buyer to complete the transaction, subject to these closing conditions:

Anti-trust approval

Ability to secure financing to complete the transaction

Satisfactory completion of Buyer’s due diligence

No material adverse change (MAC)

Buyer’s Investment committee approval

Question

For LBO transactions with a private equity firm as the Buyer, the definitive purchase agreement would typically obligate the Buyer to complete the transaction, subject to these closing conditions:

Anti-trust approval

Ability to secure financing to complete the transaction

Satisfactory completion of Buyer’s due diligence

No material adverse change (MAC)

Buyer’s Investment committee approval

BlackTom AI · Accepted Answer

The question presents a scenario about LBO transactions where the Buyer is a private equity firm, and asks which closing conditions would typically be included in the definitive purchase agreement.
Option 1: '1, 2, 3, and 4' includes anti-trust approval, financing, satisfactory completion of Buyer’s due diligence, and MAC. While anti-trust approval (1), financing (2), and MAC (4) are commonly included closing conditions, including due diligence (3) as a hard closing condition is less universal. Due diligence is often a pre-closing process, and parties frequently allow for termination or adjustment if issues are found, rather than tying closing itself to complete due diligence in every respect.
Option 2: '1, 2, and 4' lists anti-trust approval (1), financing (2), and MAC (4) but omits due diligence (3) and the Buyer's Investment Committee approval (5). This aligns with a common structure where the contract requires key external and financial conditions plus a MAC condition, while treating internal gating items like Investment Committee approval as an internal pre-closing step rather than an external closing condition. However, omitting 5 assumes Investment Committee approval occurs prior to signing or is handled outside the closing conditions.
Option 3: '1, 2, and 3' includes anti-trust, financing, and due diligence, but excludes MAC (4). In typical LBO closing sets, a No Material Adverse Change (MAC) condition is a standard protective clause; thus omitting MAC weakens a standard closing condition and seems less consistent with common practice.
Option 4: '1, 2, and 5' includes anti-trust, financing, and Investment Committee approval, but excludes MAC (4). Since MAC is a conventional closing condition to protect the buyer against material deterioration, removing MAC makes this option less aligned with standard practice, even if internal approvals (5) are important, they are not always listed as closing conditions in the contract in the same way.
Option 5: 'All of the above' would assert that all five items are closing conditions, but given that due diligence is typically not a guaranteed closing condition and internal Investment Committee processes may occur before or outside the formal closing conditions, this broad inclusion is not representative of standard practice.
In summary, the most defensible set aligns with including anti-trust approval, financing, and MAC as explicit closing conditions, while treating due diligence and internal Investment Committee approvals as separate gating items that may occur pre-closing or be addressed outside the closing conditions. Therefore, choosing 1, 2, and 4 reflects a common, but not universal, structure for closing conditions in LBOs, whereas the other options add conditions that are either too narrow, too broad, or misaligned with typical practice. The nuances depend on deal specifics and negotiated terms, but the standard emphasis tends to include anti-trust, financing, and MAC, with due diligence and internal approvals handled through different mechanisms.

SP25_FIN_622_2154 Final Exam - MBAs

查看解析

登录即可查看完整答案

类似问题

Regarding private equity and the valuation of LBOs, select the correct statement:

Which of the following statements regarding LBOs is incorrect?

An ideal LBO target would be unlevered, inefficiently managed, with stable cash flows, low required capital expenditures, and significant excess non-core assets.

In an LBO deal, which of the following is NOT a desired feature of an ideal LBO “target” company?

Which of the following statements is most CORRECT regarding Leveraged Buyouts (LBO's)?

In an LBO model, which of the following would increase the IRR for the sponsor without improving the company’s performance?

Assuming the overall economy can remain strong for the next five years, PE firms that finance LBOs with maximum debt capacity will likely experience a higher IRR on their equity investment than PE firms that use modest leverage on their LBO deals.

更多留学生实用工具

考试浏览器助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单