F3 Exam Dumps : Financial Strategy

The company is deciding between:

Selling the business via a Management Buyout (MBO), or

Selling to an external private equity (PE) buyer.

From the original company’s viewpoint, an advantage of an MBO is:

The buyers are the existing management team. Relationships already exist, and there’s usually more trust and alignment.

Post-divestment, the original company may still trade with the divested unit (e.g., as a supplier or customer). Cooperation tends to be better with a familiar internal team than with an external PE house whose primary focus is financial returns.

Why the others are wrong:

B. Enhanced big data opportunities – unrelated to the divestment method.

C. Improved relationships with MBO team in the event of a sale to PE – logically inconsistent; if sold to PE, it’s not an MBO.

D. Higher price due to synergistic benefits – PE typically looks for financial engineering and operational improvements, not classic corporate synergies. You are more likely to see synergy premia when selling to a trade buyer, not in an MBO.

So the key pro-MBO argument here is better cooperation post divestment → A.

Negatives for the bank:

A. Advanced, custom-made tech equipment – poor resale value and high obsolescence risk, weak security.

C. Premises on a long-term lease and not fully fitted out – limited asset security; further capital outlay still needed.

E. Essential ongoing R&D – continuing cash demands and uncertainty of returns.

Positives, so not negatives:

B. Continuing profitability and net cash generation – good for servicing debt.

D. Founders’ personal investment – shows commitment and loss-sharing; strengthens equity base.