Chapter 9

Question 1

Demerger (spin off)

Answer 1

Where a business completely separate, a part of its business into a separate company

Question 2

Leverage, buyouts

Answer 2

Were an investor buys a controlling interest in equity and finances, a significant percentage of the purchase price through borrowing

Question 3

Venture capitalist

Answer 3

Look to invest in businesses with high potential growth for the management have approved and track record.

They won 25 to 30% average annual return

Board presence and decision-making input.

Clear exit plan for a 3 to 7 year timescale

Question 4

Reasons the company might undertake a spin off

Answer 4

Reduce the risk of a takeover bid

Comply with legal and regulatory requirements

Question 5

Venture capitalist consideration between debt and convertible preferences shares

Answer 5

The venture capsule is likely to prefer debt because interest is a more certain type of income and paid ahead of preferences shares 

Question 6

Method of realising full value of a privately owned company

Answer 6

Where they are unable to obtain a stock exchange listing a placing would be the best course of action

Question 7

Diseconomies of scale

Answer 7

When a business expand so much that the cost per unit increase

Question 8

Management buyin

Answer 8

The purchase of a subsidiary by external managers