The directors of a multinational group have decided to sell off a loss-making subsidiary and...

CIMA F3 Question Answer

The directors of a multinational group have decided to sell off a loss-making subsidiary and are considering the following methods of divestment:

1. Trade sale to an external buyer

2. A management buyout (MBO)

The MBO team and the external buyer have both offered the same price to the parent company for the subsidiary.

Which of the following is an advantage to the parent company of opting for a MBO compared to a trade sale as the preferred method of divestment?

Raise the cash more quickly.

Avoid a hostile reaction from key management.

Focus on the core competencies of the business

Retain the know edge of key management.

CIMA F3 Summary

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