Exam 31: Mergers

The following are sensible motives for mergers: I.prevent target firm from wasting surplus funds; II.eliminate target firm inefficiencies; III.complementary resources; IV.increasing earnings per share (EPS)

Given the following data, If Firm A offers 250,000 shares to Firm B's shareholders, calculate the cost of the merger.

Which of the following is not an important piece of U.S. antitrust legislation?

Briefly discuss takeover defenses.

Companies A and B are valued as follows: Company A now acquires B by offering one (new)share of A for every two shares of B (that is, after the merger, there are 2,500 shares of A outstanding). If investors are aware that there are no economic gains from the merger, what is the price-earnings ratio of A's stock after the merger?

Antitrust law can be enforced by the U.S. federal government by I.a civil suit brought by the Justice Department; II.proceedings initiated by the Federal Trade Commission (FTC); III.proceedings initiated by the Securities and Exchange Commission (SEC)

Briefly explain what is meant by the economic gain from a merger.

If an acquisition is completed using a cash payment, then the acquisition is

The main difference to shareholders between a tax-free and a taxable acquisition is that I.in a tax-free acquisition the shares are only exchanged, while in a taxable transaction the shares are considered sold and realized capital gains or losses are taxed; II.in a tax-free acquisition a capital gain or loss is realized and then new shares are issued; in a taxable transaction the assets are revalued, taxed on any capital gains or losses, and then shares are exchanged; III.in a tax-free acquisition the shareholders simply take the cash and depart, while in a taxable transaction the shareholders must stay with the new entity

A conglomerate merger is one in which an acquiring firm buys a closely related firm.

Merging in order to lower financing costs is likely to fail for the following reason:

Name the agencies that have successfully blocked mergers on antitrust (antimonopoly)grounds.

Firm A is planning to acquire Firm B. If Firm A prefers to make a cash offer for the merger, it indicates that

Who usually gains the most in a merger?

The market for corporate control includes I.mergers; II.spin-offs and divestitures; III.leveraged buyouts (LBOs); IV.privatizations

In the purchase method of merger accounting, a new asset category called goodwill is created.

AT&T and Time Warner is an example of a

Discuss the difficulties associated with a typical merger.

The following data on a merger are given: Firm A has proposed to acquire Firm B at a price of $20 per share for Firm B's stock. What will earnings per share be for Firm A after the merger, assuming that cash is used in the acquisition?

Which of the following actions is least effective in changing a firm's strategy?