A parent company chooses to acquire only a 65% interest in its subsidiary. Which of the following is not a reason why the parent would choose to acquire less than a 100% interest in a subsidiary?

A) Reduction of ownership risk
B) Potential for increased share dilution
C) Maintenance of a market for the subsidiary's shares
D) Potential links to government support and management expertise through the NCI

Question

Bradley Smith · Accepted Answer

Final Answer : B, Explanation :  Choosing to acquire less than a 100% interest in a subsidiary can provide benefits such as reduction of ownership risk (A), maintenance of a market for the subsidiary's shares (C), and potential links to government support and management expertise through the Non-Controlling Interest (NCI) (D). However, potential for increased share dilution (B) is not a reason why a parent company would choose to acquire less than a 100% interest in its subsidiary. In fact, acquiring a larger percentage would reduce the potential for increased share dilution.

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