1.The owners of Brownfield Machinery, brothers George and Robb, now in their late 50s, have decided to sell the business. No one else in the family is interested in taking over the business. Brownfield machinery has 11 employees and sales of $2.5 million in 2012.George and Robb are considering an offer from Wilcox Co. Wilcox believes the bulk of Brownfield s value is in its client list. Much of the rest of the assets — including its employees — would most likely be jettisoned after a sale and the proceeds used to pay off the huge debt Wilcox will incur to purchase Brownfield. If George and Robb accept this offer, it could best be described as:
Question 1 options:
a.a bust-up LBO
b.a build-up LBO
c.an IPO
d.sale to employees
2.The owners of Brownfield Machinery, brothers George and Robb, now in their late 50s, have decided to sell the business. No one else in the family is interested in taking over the business. Brownfield machinery has 11 employees and sales of $2.5 million in 2012.George and Robb take pause when they realize Wilcox would break up their business. "These are our guys, our family, and we want them to keep on working". Eight of their employees step up and suggest they became members of a cooperative that will buy the business. The brothers will sell their stock to the co-op in several installments. The co-op will take out loans, which will be personally guaranteed by the sellers. The loans will be paid off out of company profits over ten years. If George and Robb accept this offer, it would best be described as:
Question 2 options:
a.a sale to employees
b.a sale to strategic buyers
c.an IPO
d.distribution of the cash flows
3.Sushi foods, is being acquired by Fusion Foods, a larger company. This acquisition is part of a merger whereby Fusian Foods is also buying three other small Asian food brands in order to create a larger enterprise. Fusion is financing these acquistions with debt. Sometime in the future Fusion Foods hopes to sell the integrated business.
Question 3 options:
a.an IPO
b.management buyout
c.build-up LBO
d.bust-up LBO
4.Heritage Partners, as described in the text, works with family owned businesses to structure deals in which the older generation can exit the business and receive money to retire, while the younger generation wants to retains some ownership in the business and provides managerial leadership. Heritage Partners offers which type of harvesting?
Question 4 options:
a.sale to employees
b.private placement
c.IPOs
d.management buyout
1. To answer this question, we need to understand what each option means:
a. A bust-up LBO refers to a leveraged buyout where the acquiring company intends to sell off the assets of the target company.
b. A build-up LBO refers to a leveraged buyout where the acquiring company wants to add the target company to its existing business to create a larger enterprise.
c. An IPO (Initial Public Offering) refers to the process of a private company going public by offering its shares to the public.
d. Sale to employees refers to the selling of a company's ownership to its employees.
Based on the information provided, it seems that Wilcox Co. intends to buy Brownfield Machinery primarily for its client list and may likely sell off the other assets and employees. Therefore, the most appropriate answer would be:
a. A bust-up LBO, as Wilcox Co. would potentially break up the business after the acquisition.
2. In this scenario, the employees of Brownfield Machinery propose to form a cooperative to buy the business from George and Robb. The cooperative will take out loans guaranteed by the sellers and pay them off over ten years using company profits. To determine the best description for this offer, let's look at the options:
a. A sale to employees refers to the selling of a company's ownership to its employees. This option aligns with the scenario provided.
b. A sale to strategic buyers refers to selling the company to buyers who have a strategic interest or advantage in acquiring the business.
c. An IPO (Initial Public Offering) refers to the process of a private company going public by offering its shares to the public.
d. Distribution of the cash flows does not accurately describe the scenario.
Based on the information given, the most appropriate answer is:
a. A sale to employees, as the employees propose to form a cooperative and buy the business from the current owners.
3. Fusion Foods is acquiring Sushi Foods as part of a merger to create a larger enterprise. The acquisition is financed with debt, and Fusion Foods plans to eventually sell the integrated business. Let's consider the options:
a. An IPO (Initial Public Offering) refers to the process of a private company going public by offering its shares to the public.
b. A management buyout refers to the purchase of a company by its current management team.
c. A build-up LBO refers to a leveraged buyout where the acquiring company wants to add the target company to its existing business to create a larger enterprise.
d. A bust-up LBO refers to a leveraged buyout where the acquiring company intends to sell off the assets of the target company.
Based on the information provided, the most appropriate answer is:
c. A build-up LBO, as Fusion Foods is acquiring multiple small Asian food brands to create a larger enterprise.
4. Heritage Partners works with family-owned businesses to structure deals where the older generation can exit the business but retain some ownership and managerial leadership for the younger generation. Let's consider the options:
a. A sale to employees refers to the selling of a company's ownership to its employees.
b. A private placement refers to the sale of securities to a select group of investors rather than the general public.
c. An IPO (Initial Public Offering) refers to the process of a private company going public by offering its shares to the public.
d. A management buyout refers to the purchase of a company by its current management team.
Based on the information provided, the most appropriate answer is:
d. A management buyout, as the older generation wants to exit the business but retain some ownership while the younger generation provides managerial leadership.