Exam 31: Mergers

Roche acquisition of Genentech is an example of: I. Horizontal merger II. Conglomerate merger III. Cross-border merger IV. Vertical merger

The main difference in a tax-free versus taxable acquisition to the shareholders is that: I. In a tax-free acquisition 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 and loss are realized and then new shares issued, while in a taxable transaction the assets are revalued, taxed on any capital gains and losses and then shares 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

Firm A has a value of $100 million, and B has a value of $60 million. Merging the two would allow a cost savings with a present value of $20 million. Firm A purchases B for $65 million. How much do firm A's shareholders gain from this merger?

Who are anti-takeover defenses designed to protect?

Supermajorities give shareholders more control over the firm.

Briefly discuss different forms of acquisition.

The following data on a merger is 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?

Given the following data: If Firm A intends to pay $7 million cash for B, calculate the cost of this merger:

The following are methods available to change the management of a firm I. a successful proxy contest in which a group of shareholders vote in a new board of directors who then pick a new management team. II. a takeover of one firm by another firm. III. a leveraged buyout of the firm by a private group of investors.

What are the tax consequences of a taxable merger?

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

Bank of America and Merrill Lynch merger is an example of: I. Horizontal merger II. Vertical merger III. Conglomerate merger IV. Cross-border merger

The DOC Corporation with a book value of $20 million and a market value of $30 million has merged with the CIC Corporation with a book value of $6 million and a market value of $8 million at a price of $9 million. If the transaction is a purchase will there be any goodwill, and if so, what is the amount of goodwill?

Discuss the difficulties associated with a typical merger.

Briefly explain some of the good motives for mergers.

Name the agencies that have successfully blocked mergers on antitrust (anti-monopoly) grounds.

Gain from mergers is defined as: Gain = PVAB - (PVA + PVB).

A modification of the corporate charter that requires 80% shareholder approval for takeover is called a(n):

Briefly explain the term "economies of scale."

Two companies should consider a merger if they have complementary resources.