Deck 11: Corporate Restructuring

Question 1

Which of the following are examples of pension-related employee benefit plans?

A) Defined benefit
B) Defined contribution
C) Profit sharing
D) All the above

Answer 1

D

Question 2

Which of the following are common reasons cited for selling off prior acquisitions?

A) Poor fit
B) Poor performance
C) Cash flow needs
D) All the above
E) None of the above

Answer 2

D

Question 3

Many studies covering a quarter of a century document the positive shareholder wealth effects of sell-offs.

Answer 3

True

Question 4

Sell-offs of their parts supplier units enabled GM and Ford to successfully use sell-offs to avoid union compensated-related liabilities of those units.

Question 5

Answer: Research, such as research by Skantz and Marchesini, as well as that of Hite, Owers, and Rogers found that unlike divestitures, announcements of voluntary liquidations were not associated with positive shareholder wealth effects.

Question 6

The trend in European sell-offs is opposite that of the United States.

Question 7

The sell-offs by Starwood following its acquisition of Taittinger were motivated by:

A) Eliminating a nonstrategic component
B) Eliminating a poorly performing unit
C) Raising cash to pay off debt
D) None of the above

Question 8

Which of the following studies showed positive shareholder wealth effects for sell-offs?

A) Cusatis, Miles, and Wooldridge
B) JP Morgan
C) Kudla and McInish
D) All the above
E) Both a and c

Question 9

Involuntary divestitures generally have what effects?

A) Positive
B) Negative
C) No consistent effects
D) None of the above

Question 10

The following describes reverse synergy:

A) 2 + 2 = 5
B) 2 + 2 = 4
C) 4 - 1 = 5
D) None of the above

Question 11

In a spin-off the entity being separated from the parent company often is assigned specific debt attributable to it as part of the sale process.

Question 12

Kaplan and Weisbach found that diversifying deals were which of the following with respect to the likelihood of subsequent divestiture?

A) Four times more likely to be divested
B) Equally likely
C) Two times less likely
D) None of the above

Question 13

Answer: The sale of Miller by Altria accomplished what:

A) Narrowed Altria's strategic focus
B) Improved Altria's overall financial performance
C) Enabled Inbev to gain market share
D) All the above
E) Both a and b f . Both a and c

Question 14

Boise Cascade abandoned its core business and focused on the business of Office Max, which it had previously acquired.

Question 15

First Data shareholders were able to realize increased value when Western Union was spun off.

Question 16

A defensive spin-off is where a target sells off a division to make the company less attractive to bidders.

Question 17

In the United States, in order for a spin-off to be nontaxable, the following must be the case:

A) Both the parent company and the spun-off entity must be in business for at least five years before the restructuring.
B) The subsidiary must be at least 80% owned by the parent company.
C) The parent company and the spun-off entity must be in the same industry
D) Both a and b
E) Both b and c

Question 18

If a public company issues stock in its own subsidiary, these shares do not have to be registered by the SEC in order to be publicly traded as the parent company's shares are already registered.

Question 19

The trend in the number of divestitures and sell-offs tends to be opposite that of M&As and the movement in the economy in general.

Question 20

Asian spin-off volume:

A) Historically follows the same pattern as the U.S. spin-off volume
B) Followed the same pattern as European spin-off volume
C) Has declined in the past when spin-offs rose in Europe and the United States
D) None of the above True or False Questions