🏦LTB
← Series 79: M&A, Tender Offers & Restructuring
Series 79 practice questionhardManagement Buyouts

In an MBO of a public company, the board forms a special committee of independent directors. The special committee should do all of the following EXCEPT:

  1. ARetain independent financial and legal advisors
  2. BNegotiate the transaction terms at arm's length with the management/PE group
  3. CAllow management to participate in the special committee's deliberations and set the offer price✓ Correct answer
  4. DEvaluate whether a market check or go-shop process is appropriate
Explanation

Why C — Allow management to participate in the special committee's deliberations and set the offer price

The special committee must be truly independent and should exclude management and any directors with conflicts of interest from its deliberations. Allowing management to participate in setting the offer price would fundamentally compromise the committee's independence and undermine its ability to negotiate on behalf of public shareholders. The committee should retain its own independent financial and legal advisors, conduct a thorough evaluation of the offer, and consider whether a market check would help ensure shareholders receive a fair price.

Turn it into reps

Reading one answer is not the same as being ready

Lucky the Banker is a free practice app with 477+ Series 79 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.

Practice Series 79 freeSeries 79 exam guide
Related M&A, Tender Offers & Restructuring questions