CIMA Exam CIMAPRA19-F03-1 Topic 7 Question 98 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 98
Topic #: 7

A company is considering a divestment via either a management buyout (MBO) or sale to a private equity purchaser. Which of the following is an argument in favour of the MBO from the viewpoint of the original company?

ABetter co-operation post divestment.

BEnhanced big data opportunities.

CImproved relationships with management buyout team in the event of a sale to the private equity purchaser.

DHigher price due to synergistic benefits.

Show Suggested Answer

Suggested Answer: A

by Yong at Sep 15, 2024, 09:29 AM

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Ernestine

8 months ago

Haha, B is just a random buzzword thrown in there to distract us. Nice try, but I'm not falling for that one!

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Eliseo

8 months ago

Hmm, I'm going to have to go with A. Keeping the management team motivated and engaged is key after a divestment.

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Virgie

7 months ago

That's a good point. Maintaining a good relationship with the management team can definitely benefit the original company in the long run.

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Celestina

7 months ago

C) Improved relationships with management buyout team in the event of a sale to the private equity purchaser.

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Leila

7 months ago

A) Better co-operation post divestment.

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Camellia

8 months ago

C is just plain silly. Why would the original company care about their relationship with the MBO team if they're selling to a private equity firm?

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Kaycee

8 months ago

B is a bit out of left field. Big data has nothing to do with whether the company should choose an MBO or private equity sale.

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Shad

8 months ago

D seems like the best option to me. The synergistic benefits of the MBO should result in a higher price for the original company.

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Sheridan

7 months ago

Lai: It's important to consider all the potential benefits before making a decision.

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Lai

7 months ago

User 2: Definitely, higher price due to synergistic benefits is a strong argument in favor of the MBO.

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Stephaine

8 months ago

I agree, D does seem like the best option. The synergistic benefits could lead to a higher price.

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Tegan

8 months ago

But what about option A? Better co-operation post divestment could also be beneficial for the original company.

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Ivette

8 months ago

I think the correct answer is A. The management team will likely be more invested in the success of the company post-divestment if they've bought it out themselves.

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