View All num of num See all Photos Goldman Sachs www.goldmansachs.com Engaged Employer Overview Reviews Salaries Interviews Jobs Photos Benefits 2.2k Reviews 7.6k Salaries 2.2k Interviews 1.5k Jobs Follow Add Interview Follow Add Interview Interview Question Investment Banking Analyst Interview(Student Candidate) New York, NY Goldman Sachs How does an LBO work? Would you rather finance an acquisition with a debt/equity split of 70/30 or 90/10? Why? Tags: See more , See less 8 Answer Add Tags Answer Interview Answer 1 Answer ▲ 3 ▼ An LBO occurs when an investor, typically a financial sponsor, acquires a controlling interest in a company's equity and where a significant percentage of the purchase price is financed through leverage (borrowing).Typically the debt portion of a LBO ranges from 50%-85% of the purchase price, but in some cases debt may represent upwards of 95% of purchase price. This is because the amount of debt used to finance a transaction varies according to the financial condition and history of the acquisition target, market conditions, the willingness of lenders to extend credit (both to the LBO's financial sponsors and the company to be acquired) as well as the interest costs and the ability of the company to cover those costs. Thus to use the LBO to their advantage higher the debt, better is the advantage. Snigdha Mehrotra on Apr 27, 2012 Interviews > Investment Banking Analyst > Goldman Sachs Add Answers or Comments To comment on this, Sign In or Sign Up.