Deck 28: Divestitures

Question 1

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

Answer 1

True

Question 2

Acquisitions occur in waves,but divestitures occur randomly.

Answer 2

False

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.

Answer 3

True

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.

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.

Question 6

Which of the following is the best definition of a trade sale?

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

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.

Question 8

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

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.

Question 10

With respect to their effect on divestures,which of the following is most accurate concerning legal,contractual,and regulatory barriers?

A)They are one of the reasons that divestitures are rarer than acquisitions.
B)They are typically not large enough to distort the value-creation potential of divestitures.
C)They are generally a problem only for larger divestitures,and smaller divestures are not affected by them.
D)They are an established hurdle that most companies address before the process to determine the viability of the divestiture.

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?

A)Carve-out.
B)Spin-off.
C)Split-off.
D)Tracking stock.