{"id":16325,"date":"2021-06-14T15:58:48","date_gmt":"2021-06-14T15:58:48","guid":{"rendered":"https:\/\/analystprep.com\/study-notes\/?p=16325"},"modified":"2022-04-25T10:42:33","modified_gmt":"2022-04-25T10:42:33","slug":"corporate-restructuring","status":"publish","type":"post","link":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/corporate-restructuring\/","title":{"rendered":"Corporate Restructuring: Equity Carve-Outs, Spin-Offs, Split-Offs, and Liquidation"},"content":{"rendered":"<p><iframe loading=\"lazy\" src=\"\/\/www.youtube.com\/embed\/XBra1Jp5JAU\" width=\"611\" height=\"343\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\r\n\r\n<p>Corporate restructuring is the act of modifying a company&#8217;s capital structure or operations by selling, splitting off, or shedding operating assets. Divestiture occurs when a company decides to liquidate or spin-off a division or a subsidiary. Restructuring can take the following forms:<\/p>\r\n<ul>\r\n\t<li><em><strong>Equity carve-out:<\/strong> <\/em>It involves creating a new entity and the sale of equity in it to outsiders.<\/li>\r\n\t<li><em><strong>Spin-off:<\/strong><\/em> A new separate entity is formed, and the parent company&#8217;s shareholders receive a proportional number of shares. The result of a spin-off is that shareholders owning stock in two different companies that used to be one.<\/li>\r\n\t<li><em><strong>Split-off:<\/strong> <\/em>This is similar to the spin-off, but the main difference is that some of the shareholders in the parent company are given shares in the new company in exchange for their shares in the parent company.<\/li>\r\n\t<li><em><strong>Liquidation:<\/strong> <\/em>This involves dividing, breaking up a company, and selling off its assets and is often associated with bankruptcy.<\/li>\r\n<\/ul>\r\n<blockquote>\r\n<h2>Question<\/h2>\r\n<p>Jake Newton is an analyst currently overseeing the corporate restructuring of a company. Newton has suggested that the management of the company break up the company and sell off its assets. The divestiture technique that Newton is suggesting is <em>most likely<\/em> a (an):<\/p>\r\n<ol style=\"list-style-type: upper-alpha;\">\r\n\t<li>Liquidation.<\/li>\r\n\t<li>Equity carve-out.<\/li>\r\n\t<li>Split-off.<\/li>\r\n<\/ol>\r\n<h4>Solution<\/h4>\r\n<p><strong>The correct answer is A.<\/strong><\/p>\r\n<p>Liquidation involves dividing, breaking up a company, and selling off its assets and is often associated with bankruptcy.<\/p>\r\n<p><strong>B is incorrect. <\/strong>In equity carve-out, a new legal entity is formed, and its equity is sold to outsiders.<\/p>\r\n<p><strong>C is incorrect. <\/strong>A split-off occurs when some of the parent company&#8217;s shareholders are given shares in a newly created entity in exchange for their parent company shares.<\/p>\r\n<\/blockquote>\r\n<p>Reading 18: Mergers and Acquisitions<\/p>\r\n<p><em>LOS 18 (k) Distinguish among equity carve-outs, spin-offs, split-offs, and liquidation.<\/em><\/p>\r\n","protected":false},"excerpt":{"rendered":"<p>Corporate restructuring is the act of modifying a company&#8217;s capital structure or operations by selling, splitting off, or shedding operating assets. Divestiture occurs when a company decides to liquidate or spin-off a division or a subsidiary. Restructuring can take the&#8230;<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[102,346],"tags":[216,344,398,399,384],"class_list":["post-16325","post","type-post","status-publish","format-standard","hentry","category-cfa-level-2","category-corporate-finance-cfa-level-2","tag-cfa-level-2","tag-corporate-finance","tag-corporate-restructuring","tag-los-n","tag-reading-23-mergers-and-acquisition","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Corporate Restructuring: Equity Carve-Outs, Spin-Offs, Split-Offs, and Liquidation - CFA, FRM, and Actuarial Exams Study Notes<\/title>\n<meta name=\"description\" content=\"Corporate restructuring is the act of modifying a company&#039;s capital structure or operations by selling, splitting off, or shedding operating assets.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/corporate-restructuring\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Corporate Restructuring: Equity Carve-Outs, Spin-Offs, Split-Offs, and Liquidation - 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