2. Methods of changing corporate control Aa Aa When two companies get involved i

Question

2. Methods of changing corporate control Aa Aa When two companies get involved in each other's business in any form, structural changes take place in both companies. The following is one way that companies join forces: Two unaffiliated companies establish a formal relationship by contributing financial and/or physical assets to pursue a mutually beneficial goal without combining all their assets The preceding statement best describes a The employees and a small group of managers of Allied Biscuit Company borrowed $23.75 million and purchased its outstanding common stock, with the expectation of making the company more profitable and themselves wealthy. This activity best describes a: O Leveraged buyout O Spin-off

Explanation / Answer

The statement is regarding joint ventures, in which two firms establish a business venture to pursue a common goal. In this case, there is no change in their existing line of businesses.

This is a case of leveraged buyout in which investors use leverage to buyout a firm.

Carving out a business unit is a case of divestiture.

In this carve-out, the shares of softward company will be sold to new investors through a public offering. The existing shareholders already have ownership of software division through their investment in Digicon.

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