Exam 31: Mergers

Which of the following factors influence the choice between merger and an acquisition of stock? I. Shareholders are dealt with directly to bypass target management and board of directors II. In a tender offer, usually some minority shareholders do not tender stopping complete firm absorption III. Target management may be unfriendly and resist an offer. Resistance usually makes the stock price higher

The following are dubious reasons for mergers: I. to diversify II. increasing the earnings per share (EPS) III. lower financing costs IV. industry consolidation

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

Briefly explain what is meant by "the Cost of acquiring" in the context of a merger?

Suppose that the market price of Company A is $50 per share and that of Company B is $20) If A offers half a share of common stock for each share of B, the ratio of exchange of market prices would be:

Briefly explain the different types of mergers.

The merger of Pfizer and Wyeth is an example of: I. Horizontal merger II. Cross-border merger III. Conglomerate merger IV. Vertical merger

Diversification is a very sensible reason for two companies to merge.

The acquisition of stock has the advantage of:

If an acquisition is made using cash payment then the acquisition is:

The following are good reasons for mergers: I. Economies of scale II. Economics of vertical integration III. Complementary resources IV. Surplus funds V. Eliminating inefficiencies VI. Industry consolidation

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. Calculate the post merger P/E ratio assuming cash is used in the acquisition.

The following are industries in which large mergers have been blocked on antitrust grounds are: I. aerospace II) aluminum III. telecoms IV. supermarkets V. video rentals VI. office equipment