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Question 51

Multiple Choice

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If Canfor (lumber products) were to acquire a national homebuilding firm, the combination would be termed a:

A) Horizontal merger
B) Vertical merger
C) Conglomerate merger
D) A spin-off by the national homebuilding firm

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Question 52

Multiple Choice

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One indication that investors expect no synergy from a merger would be that:

A) Total market value of the merged firms does not change
B) The P/E ratio of the merged firms changes
C) The acquiring firm financed the merger with cash
D) The merged firms are from different industries

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Question 53

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One common explanation for the success of MBOs is the incentive effect of leverage.Explain.

Which of the following is not a takeover defence?

A public offer to purchase the shares of existing shareholders in order to take the firm over is called a:

The track record for proxy fights suggests they are:

Attempt to gain control of a firm by winning votes of its shareholders is best defined as:

The key criterion used by the competition tribunal is whether a merger substantially lessens competition.

An acquiring company is considering a takeover of a target company.The acquiring company has 15 million shares outstanding with $30 per share.The target company has 8 million shares outstanding which sell for $24 per share.If the acquiring company estimates that merger gains will be $16 million, determine what the highest price will be paid per share for the target.

What does empirical evidence suggest about the distribution of gains from mergers?

If an automobile manufacturer were to acquire one of the firms listed below, which acquisition would be called a horizontal merger?

The observation that cash-rich firms often use the funds to diversify rather than increase dividends indicates that:

Discuss how tactics such as shark repellents or poison pills accomplish their intent.

Amendments to the corporate charter that attempt to circumvent mergers are known as poison pills.

Firms A and B intend to merge and Firm A has calculated the NPV of the merger to be $2 million after paying $8 million for Firm B.If Firm A had a pre-merger value of $10 million and Firm B had a pre-merger value of $6 million, calculate the value of the merged entity, as well as the cost of the merger. PV_AB = PV_A + PV_B + gain = $10 million + $6 million + $4 million = $20 million Cost or merger = cash - PV_B = $8 million - $6 million = $2 million NPV = $4 million - $2 million

In mergers financed by cash, the merger cost is not affected by the size of the merger gain.

Firm B's one million shares of stock currently sell for $12 each, but Firm A is preparing an $18 per share tender offer.Firm A estimates the gain of the merger to be $6 million.What% of the merger gains will be captured by B's stockholders?

According to the free-cash-flow theory of takeovers, post-merger gains in market value represent:

In which merger type would it be least likely to observe economies of scale?

Companies spin off the business by selling part of the assets to another company.