Restructuring, Refinancing, and Liquidation

These flashcards cover key concepts related to restructuring, refinancing, and liquidation strategies for companies in financial distress.

What are 3 ways to help a business in trouble?

Fixing the plan, getting new loans, or closing and selling everything.

Why would a company change its structure?

To work better and pay back what it owes to others.

What does it mean to sell part of a business?

It is called divestment, where a company gives away a piece of itself for money.

What is it called when 2 companies join to become 1 new one?

A merger.

What is it called when one company buys another?

An acquisition.

What is a spin-off?

When a part of a big company breaks off to become its own new business.

Why would a company sell off some parts?

To focus on its main job and become more valuable.

What is it called when a business closes and sells all its things?

Liquidation.

What are the 2 ways a business can close?

By choice or because they are forced to.

When is a company 'broke' or insolvent?

When it does not have enough money to pay its bills.

What is voluntary closing?

When the bosses choose to close the business to handle things better.

What is compulsory closing?

When a court forces a business to close because it has no money.

What is a management buyout?

When the people who run the company buy it for themselves.

How does workers owning the company help?

They work harder because they feel like the owners.

Why do a spin-off?

To make the business simpler and easier to understand.

What is a risk when managers buy the company?

They might try to get a cheap price for themselves.

What is a share repurchase?

When a company buys back its own stock from people.

What is the Pac-Man defense?

Trying to buy the company that is trying to buy you.

Why would a company 'go private'?

To follow fewer rules and spend less money on paperwork.

Why sell a part of the business that is not doing well?

To get cash and stop wasting time on things that fail.

What is a reverse takeover?

When a smaller company buys a bigger one to protect itself.

Why might a company run out of cash?

It cannot pay bills or it is not working correctly.

When does life end for a business?

In liquidation, when it cannot pay what it owes.

Why sell a part for taxes?

Sometimes a part is worth more alone than with the big company.

What is a demerger?

Breaking one company into 2 separate ones.

What happens to workers if the company closes forever?

They lose their jobs and might need help finding a new one.

What is a management buy-in?

When bosses from outside come in and buy the company.

What is a leveraged buyout?

Buying a company using mostly borrowed money.

Who decides if a company can buy back its own stock?

The owners, also called shareholders.

What is a danger for the owners in a manager buyout?

Managers might not be fair to the owners.

What is a golden parachute?

Lots of money given to a boss if they lose their job after a sale.

What is 'goodwill' in a business?

The value of a company's name and its good reputation.

What is a strategic fit?

When 2 companies work very well together like puzzle pieces.

What are agency costs?

Money lost when bosses do things for themselves instead of the owners.

Why make a big company simpler?

To make talking and working together faster and easier.