Which one of the following statements is correct?
A)A spin-off frequently follows an equity carve-out.
B)A split-up frequently follows a spin-off.
C)An equity carve-out is a specific type of acquisition.
D)A spin-off involves an initial public offering.
E)A divestiture means that the original firm ceases to exist.

Question

Quizplus · Accepted Answer

A spin-off is when a parent company creates a separate and independent company by distributing shares of the new company to its existing shareholders. An equity carve-out is when a parent company sells a portion of its subsidiary to the public through an IPO, while still retaining control of the company. Therefore, it is possible for a spin-off to be followed by an equity carve-out, but not the other way around.

Which One of the Following Statements Is Correct