1. When the existing management team of a company teams up with a new PE fund to acquire the company from its shareholders, this is called a:
a) Management buy-in
b) Management buyout
c) Leveraged buyout
d) Venture capital investment
2. Which of the following company exit alternatives does not provide a full exit to a PE fund?
a) A partial IPO
b) A sale to a trade buyer
c) A sale to a PE buyer
d) A debt recapitalization
3. What are the likely outcomes for a non-performing company which has been the subject of a leveraged buyout (LBO) and does not meet its debt obligations?
a) Lenders will seize control over the company and become shareholders
b) The PE owner will buy debt from lenders to extinguish the debt obligations
c) The company will be sold and sales proceeds will go to repay the PE fund’s equity investment in priority
d) The company will be sold and sales proceeds will go to repay the lenders’ loans in priority
e) Lenders will agree to write down debt in exchange for no commitment for the company or the PE owner
4. What is the carried interest held by the General Partner (GP)?
a) The GP’s interest in a portfolio company
b) A company’s management incentive scheme to deliver value to the PE fund
c) The GP’s incentive scheme to deliver value to LPs
d) LP’s interest in a PE fund which is managed (carried) by the GP