Exam 18: Mergers, Lbos, Divestitures, and Business Failure

________ results when a firm acquires a supplier or a customer.

The combination of a dress manufacturer and a credit bureau is an example of

A vertical merger is a merger of two firms in the same line of business.

________ is an arrangement initiated by the debtor firm to negotiate with the creditors about a plan for sustaining or liquidating the firm.

An attractive candidate for acquisition through leveraged buyout must have a good position in its industry with a solid profit history and reasonable expectation for growth.

A vertical merger may result in expansion of operations in an existing product line and elimination of a competitor.

________ may replace the operating management with a selected creditor.

Holding companies simply are corporations that have voting control of one or more other corporations and the companies they control are often referred to as subsidiaries.

The overriding goal for merging is to

The creditor in possession in a Chapter 12 bankruptcy proceeding is responsible for valuing the firm both in terms of its liquidation value and as a going concern.

The owners of a holding company can control significantly larger amounts of assets than they could acquire through mergers.

Typically, reasons for undertaking mergers are

A holding company is a corporation which is controlled by one or more other corporations.

Key disadvantages of holding companies include all of the following EXCEPT

The motive for divestiture is often to get rid of a product line in order to generate cash for expansion of other product lines.

The ability to use the same sales and distribution channels to reach customers of both businesses is a benefit of

LBOs are an example of a financial merger undertaken to create a high-debt private corporation with improved cash flow and value.

Consolidation involves the combination of two or more firms, and the resulting firm maintains the identity of one of the firms.

Cash acquisitions of going concerns are best analyzed using

When the ratio of exchange in a merger is equal to one and both the acquiring and the target companies have the same premerger earnings per share, the merged firm's earnings per share will initially