As part of its restructuring plan, a holding company plans to undertake an IPO for 35 percent of the shares it owns in a subsidiary. The sale of these shares would be called a
A) Divestiture
B) Split-off
C) Split-up
D) Equity carveout
E) Breakup

Question

Quizplus · Accepted Answer

The sale of 35 percent of the shares in a subsidiary by a holding company is known as an equity carveout. This is a common strategy used by companies to raise capital while still retaining control of the subsidiary. A divestiture refers to the sale or disposal of a business unit or subsidiary, while a split-off and split-up involve the separation of multiple subsidiaries or business units. A breakup may refer to any of these strategies or to the dissolution of a company altogether, but is not specific enough to be the best choice for this scenario.

As Part of Its Restructuring Plan, a Holding Company Plans