What might be a disadvantage of asset stripping for the acquiring company?

The selection highlights a significant downside of asset stripping. Asset stripping involves a company acquiring another firm primarily to sell off its valuable assets rather than maintain its operations. This often results in substantial job losses, as the acquiring company may decide to close down subsidiaries, streamline operations, or dissolve divisions that are deemed non-essential. Employees may be laid off as part of this strategy, leading to a negative impact on workforce morale and public perception of the company.

This practice can also lead to ethical concerns within the business community and affect long-term relationships with stakeholders, including customers and suppliers who may view the acquiring company unfavorably for its approach to takeovers. While it can generate immediate financial gain through the sale of assets, the broader consequence of job losses can harm the acquiring company's reputation and its operational sustainability in the long run. This makes the impact on employment a crucial factor when evaluating the repercussions of asset stripping.