Found 242 Articles for Finance

If the buyer wants to purchase an operating asset instead of shares in a merger and acquisition transaction, then that deal is called an asset deal. An asset deal is not a form of acquisition. It comes under transfer of business units/assets.To complete the asset deal transaction, an asset purchase agreement is made between the buyer and the seller. This agreement outlines the asset purchased.Asset purchase agreement (APA) includes payment structure, representations, considerations, warranties, legal structures etc.Asset purchase agreementAsset purchase agreement is used to complete the asset deal transaction. The agreement outlines the specific assets (which will be purchased), total ... Read More

Disinvestments take place when the companies want to liquidate their stocks. If the companies want to change the rules by pressurizing the government or an industry, they will go for disinvestments, which also results in funds reduction.ProcedureThe procedure for a disinvestment in divestiture is as follows −Principle consent by administrative ministry, Centre public sector enterprise (CPSE).Proposal to disinvest by the Cabinet Committee on Economic Affairs (CCEA) approval.With an approval of the finance minister, the Constitution of inter-ministerial group to guide the disinvestment process.Inter-ministerial group appoints the advisers (merchant bankers, legal advisers, book running lead managers).Book running lead managers will give ... Read More

Equity carve out is a process, where a subsidiary company is separated from the parent company. Subsidiary company has a new board of directors and financial statements. Parent company offers strategic support and resources.The parent company also retains controlling the interest in the new entity. Equity carve out allows strategically diversification (other than its core operation).Understanding carve outsParent company sells some of the shares of its subsidiary or child company through Initial public offering (IPO). The subsidiary or child companies have new shareholders after the event. Usually, carve out is followed by full spin off of subsidiaries to shareholders of ... Read More

A split is the process of dividing a company into two or more legal units. Its main aim is to maximize profitability by eliminating the stagnant units.The splits are divided into the following −Split upsCompany is divided into two or more entities, where the parent company loses its existence. In merger and acquisition, split up are corporate actions, where a company is split or divided into more than one company. These companies are independent and they have separate administrations. Share of the parent company is exchanged between newly formed independent companies.Some of the reasons for split ups are as follows ... Read More

Spin offs is the process of creating a new separate legal entity under its own management and board of directors. Parent company distributes the new shares to its existing shareholders.A brief idea of spin offs is given below −Main objectivesThe main objectives of spin off are as follows −Valuation for undervalued assets.Undiversification.To reduce bureaucracy.Promote sponsorship.Better performance.Corporate divestiture.Spin off is used as an operational strategy used by companies to create a subsidiary business from a parent company. In this parent company separate some of its business operations and creates a subsidiary or seconded traded entity and shares of the parent company ... Read More

Divestiture is described as “a part or total disposal of an asset or a business entity through a sale, exchange, closure or a bankruptcy”. The management thinks of disposal of a unit or business entity because contribution of that unit or business entity is minimal or nothing.ReasonsThe reasons for divestiture are as follows −Heavy loss in units.Negative cash flows over a period of time.Unable to compete in the market.No technology up gradation.Difficult to integrate.Alternative for good investment.Legal problems.Less or minimum market share.TypesThe types of divestiture are as follows −Spin offs − Subsidiary company is created.Splits − Parent company is split ... Read More

Divestiture is also called as divestment which is used by corporations for disposal of their business unit with intention to focus on more profitable units. Some companies had difficulties in managing some of their business units, some going for growth trajectory are some of the reasons why companies use divestitures.Split-offs and splits-ups are methods used by corporations for their divestment.Split-offIn a split-off parent company splits some of their assets and forms a subsidiary company with their split assets. Shareholders of the parent company will have an opportunity to exchange shares (if they want) of the parent company to the newly ... Read More

Care-outs, split-offs, spin-offs and splits-ups are commonly used divestiture methods by corporations in order to maintain their portfolio strategy and to achieve their financial goals.Carve-outsCarve-out is the process of dividing the secondary company from its original or parent company. Dividing in the sense the secondary company is now a newly independent company and it has no shadow of its parent organization.Newly formed company has its own board of directors. In carve-outs shares of the parent company will be sold or distributed in initial public offering (IPO). They are not distributed to existing shareholders.AdvantagesThe advantages of carve outs are as follows ... Read More

Divestitures are commonly used words for effective management of company portfolio and to achieve financial goals. There are different methods in divestiture, commonly used are spin-offs, care-outs, split-offs and split-ups.Spin-offsIt is the term used for newly formed independent companies which are formed from parent companies. In these spin-offs the parent company sells their existing shares to its existing shareholders.AdvantagesThe advantages of spin-offs are as follows −Using spin-off methods companies can increase their profits. They can attract new shareholders.They can set and achieve their own goals by following their business models.Provides security to shareholders.Employees can explore their individuality and vision.Newly formed ... Read More

For effective management of their portfolio to achieve financial goals companies use various divestiture methods like spin-offs, split-ups, carve-outs and split offs. These are commonly used corporate actions to ensure potential growth of both business and shareholders wealth.Split-upsAs the name suggests, split-ups are nothing but company splitting of parent organizations into two or more independent or separate companies. Stocks of parent organizations may be traded for newly formed companies. There may be many reasons for split-ups, some of them are strategic decisions to recondition their operations, companies need different company lines, in terms of funds, resources etc.Investors can take advantage ... Read More