The profit to be gained from buying a parent firm and selling off its portfolio piecemeal gives potential buyers a significant ________.
A) pre-sale profit
B) consolidation discount
C) diversification discount
D) competitive advantage

Question

Quizplus · Accepted Answer

The phrase "selling off its portfolio piecemeal" suggests that the parent firm has a diversified portfolio of assets or businesses. Selling off these assets individually could potentially result in a diversification discount, as buyers may not be willing to pay as much for each asset separately as they would for the entire portfolio together. This is because owning a diversified portfolio provides benefits such as reduced risk through diversification, which buyers may not be able to achieve by purchasing individual assets. Therefore, potential buyers of the parent firm could stand to gain a significant discount by buying the parent firm and selling off its assets piecemeal.

The Profit to Be Gained from Buying a Parent Firm