BEC 5 M7: Economic Effect of Significant Transactions

Question 1

circular Combination

Answer 1

when different business units with relatively remote connections come together under single management

Question 2

diagonal combination

Answer 2

when a company that engages in an activity integrates with another company that provides ancillary support for that primary activity.

Question 3

tender offer

Answer 3

company makes an offer directly to shareholders to buy the outstanding shares of another company at a specific price

Question 4

three kinds of divestiture

Answer 4

1. Sell-off
2. Spin-off
3. Equity Carve-out

Question 5

Sell-off

Answer 5

outright sale of a subsidiary

Question 6

Spin-off

Answer 6

creates a new, independent company by separating a subsidiary business from a parent company

Question 7

equity carve-out

Answer 7

occurs when a subsidiary is made public through an IPO, thereby creating a new publicly listed company

Question 8

Difference between tender offer and acquisition

Answer 8

In tender offer, the buying company goes to the shareholders. In an acquisition, the buying company goes to management.