Question 1

Executives seem to shy away from divestitures and usually delay them too long.

Accepted Answer

Research has shown that executives tend to delay divestitures and are often reluctant to pursue them, preferring instead to hold onto underperforming businesses in the hope of a turnaround or a future recovery of value.

Question 2

Acquisitions occur in waves,but divestitures occur randomly.

Accepted Answer

Both acquisitions and divestitures can occur in waves, often driven by economic, regulatory, and industry-specific factors, rather than divestitures happening randomly.

Question 3

According to data on more than 200 carve-outs announced before 1998,carve-out entities do not last.The majority of the subsidiaries were spun off further,acquired,or merged with other players.

Accepted Answer

The statement indicates that carve-out entities typically do not last and are often spun off, acquired, or merged with other companies.

Question 4

Whether or not a spin-off is part of a focus-improving strategy can be important with respect to how much value it creates.

Accepted Answer

This statement is true. If a spin-off is part of a larger focus-improving strategy, it is more likely to create value for the company and its shareholders. If it is simply a standalone decision without a clear strategic rationale, it may not be as effective in generating value.

Question 5

Which of the following would be classified as a private divestiture?
I.Split-off.
II.Carve-out.
III.Trade sale.
IV.Joint venture.

A)I and II only.
B)I,II,and IV only.
C)II and III only.
D)III and IV only.

Accepted Answer

The answer of Which of the following would be classified...

Question 6

Which of the following is the best definition of a trade sale?&#10;A)Sale of part or all of a business to a strategic or financial investor.&#10;B)A trade of a subsidiary's assets for other physical assets to avoid taxes.&#10;C)Sale of all shares of a subsidiary to new shareholders in the stock market.&#10;D)A combination of part or all of a business with other industry players,other companies in the value chain,or venture capitalists.

Accepted Answer

A trade sale refers to the sale of part or all of a business to a strategic or financial investor, which can include the sale of shares or assets. This is often done in order to generate a return on investment for the business owner or shareholders. Options B, C, and D do not accurately describe a trade sale.

Question 7

Which of the following are true concerning private transactions?
I.Most are done to financial buyers.
II.They tend to capture value more quickly.
III.Fiscal implications may affect the decision.
IV.They are usually a better choice if identifiable buyers exist.

A)I and II only.
B)I,II,and III only.
C)II,III,and IV only.
D)I,II,III,and IV.

Accepted Answer

Private transactions tend to capture value more quickly than public transactions, and fiscal implications may also affect the decision. Private transactions may not be the best choice if there are no identifiable buyers, but if there are, they are usually a better choice than public transactions. While financial buyers may be a common type of buyer in private transactions, it is not true that most private transactions are done with financial buyers.

Question 8

The liquidity of the assets of the divested company does not play a role in the amount of value created.

Accepted Answer

The liquidity of the assets of the divested company can impact the amount of value created. If the assets are highly liquid, the sale may generate more cash which could be used in other areas of the business to create more value. On the other hand, if the assets are illiquid, the sale may not generate as much cash, which could limit the potential value creation.

Question 9

Explain the reasons that a parent company may not want to give up control over a business unit it wants to divest and the preferred method of divestment in this case.

Accepted Answer

The answer of Explain the reasons that a parent company...

Question 10

With respect to their effect on divestures,which of the following is most accurate concerning legal,contractual,and regulatory barriers?&#10;A)They are one of the reasons that divestitures are rarer than acquisitions.&#10;B)They are typically not large enough to distort the value-creation potential of divestitures.&#10;C)They are generally a problem only for larger divestitures,and smaller divestures are not affected by them.&#10;D)They are an established hurdle that most companies address before the process to determine the viability of the divestiture.

Accepted Answer

The answer of With respect to their effect on divestures,which...

Question 11

Which of the following is the best name for a distribution of all shares in a subsidiary to existing shareholders of the parent company?&#10;A)Carve-out.&#10;B)Spin-off.&#10;C)Split-off.&#10;D)Tracking stock.

Accepted Answer

The answer of Which of the following is the best...

Deck 28: Divestitures