What could happen to the employees involved in an employee buyout if t

QUESTION

What could happen to the employees involved in an employee buyout if the company performed very poorly?

What will be an ideal response?

ANSWER

Answer: Employees who had borrowed money against their own assets to purchase the company could lose the assets they borrowed against, such as their houses, cars, savings, or pension plans.
Explanation: In an employee buyout, a firm’s employees borrow money against their own assets, such as their houses or their pension funds, to purchase the firm from its present owners. The employees then become the new owners of the firm. In the event the firm performs poorly, the employees could lose the assets they borrowed against, such as their houses or pension funds.