Exam 23: Mergers and Acquisitions

Alpha Products has 5,200 shares outstanding at a market price per share of $31. Beta Distributors has 7,500 shares outstanding at a market price of $38 a share. Neither firm has any debt. Beta is acquiring Alpha for $185,000 in cash. What is the merger premium per share?

A change in the corporate charter making it more difficult for the firm to be acquired by increasing the percentage of shareholders that must approve a merger offer is called a:

Suppose General Motors buys up auto dealerships in all the major cities in Canada. This is an example of a _________________ acquisition.

Suppose Ford acquires General Motors. This is an example of a ___________ acquisition.

Synergistic benefits can often be realized by merging with a firm that has net operating losses.

_____________ is a defensive tactic in which a firm makes a tender offer for a given amount of its own stock while excluding certain shareholders.

Which one of the following statements is correct?

Suppose you have the following information concerning an acquiring firm (A) and a target firm (B). Neither firm has any debt. The incremental value of the acquisition is estimated to be $250,000. Firm B is willing to be acquired for $540,000 worth of Firm A's stock. What is the NPV of acquiring Firm B?

Provide a definition of a split-up.

Firm B is willing to be acquired by firm A at a price of $34 a share in either cash or stock. The incremental value of the proposed acquisition is estimated at $80,000. What is the NPV of acquiring firm B if the merger is an all cash deal?

For an acquisition to be tax-free, the acquisition must involve two Canadian corporations subject to corporate income tax.

Provide a definition of an amalgamation.

Both firms are 100% equity-financed. Firm A can acquire firm B for $82,500 in the form of either cash or stock. The synergy value of the deal is $12,500. What is the cost of acquisition when stock financing is used?

If the average cost per unit decreases when a horizontal merger occurs then the combined firm is benefiting from synergy arising from:

Provide a definition of a leveraged buyouts (LBOs).

Provide a definition of corporate governance.

Suppose you have the following information concerning an acquiring firm (A) and a target firm (B). Neither firm has any debt. The incremental value of the acquisition is estimated to be $250,000. Firm B is willing to be acquired for $540,000 worth of Firm A's stock. What is the value of Firm B to A in this case?

Weston Bakery and Early's Bakery are all-equity firms. Weston's has 1,200 shares outstanding at a market price of $16 a share. Early's has 1,500 shares outstanding at a price of $27 a share. Early's is acquiring Weston's for $24,000 in cash. What is the merger premium per share?

Both firms are 100% equity-financed. Firm A can acquire firm B for $82,500 in the form of either cash or stock. The synergy value of the deal is $12,500. What will the price per share be of the post-merger firm if payment is made in stock?

As a means of protecting their company positions, a company may adopt a poison pill device that makes it nearly impossible for another firm to take control of the firm without the consent of the: