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Regarding financial engineering, private equity firms influence portfolio companies in three key ways. Which of the following statements incorrectly identifies one of these influences? A. Firms structure management incentive packages to include significant upside via stock options and stock ownership. B. Value-creation plans: strategic planning, which may include opportunity discovery and the identification of potential acquisition targets, as well as ways to cut costs and/or improve productivity and potential management changes, are potential components of a value-creation plan. C. Management must make a significant investment in the firm. This gives management both up- and down-side exposure if the firm does well, or poorly. D. The significant amount of leverage in the transaction reduces the free cash flow to the firm since large principal and interest payments must be made by the company. |