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

The U.S. approaches used in hostile takeovers is an affective method of changing corporate control and used in many areas of the world including Great Britain, China, and Japan.

In a voluntary settlement, one group of creditors having claims of $1,000,000 will be immediately paid 95 cents on the dollar. The remainder of the creditors will postpone payment an additional 60 days. This is an example of

A merger of a paper manufacturer and a logging company is an example of

In a voluntary settlement, composition is an arrangement in which the creditor committee replaces the firm's operating management and operates the firm until all claims have been settled.

A spin-off results in the divested unit

Most firms seeking merger partners will hire the services of

The tax loss carryforward benefits can be used in mergers but cannot be used in the formation of holding companies.

The result of spin-off to the parent company is

The debtor in possession in a Chapter 11 bankruptcy proceeding is responsible for valuing the firm both in terms of its liquidation value and as a going concern.

Primary motives for merging include growth or diversification, synergy, fund raising, increased managerial skill or technology, tax considerations, increased ownership liquidity, and defense against takeovers.

Business failure may be caused by all of the following EXCEPT

The long-run effect on the earnings per share of the merged firm depends largely on

________ involves the combination of firms in unrelated businesses.

The acquisition of a "cash-rich" company allows the acquiring company

One of the key attributes that makes a firm a good candidate for an LBO is that it has a solid position in the industry with reasonable expectations for future growth.

________ may result in expansion of operations in an existing product line and elimination of a competitor.

If the P/E paid for a target company is less than the P/E of the acquiring company, the effect on the earnings per share of the acquiring company will be

________ is achieved by acquiring a company in the same general industry, but neither in the same line of business nor a supplier or a customer.

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

The "stakeholders" in targeted takeover companies include the