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

Leveraged buyouts are clear examples of

The reduction of risk resulting from combining firms with differing seasonal or cyclical patterns of sales or earnings is a key benefit of

In a voluntary settlement, each creditor will be paid only 45 cents on the dollar immediately. This is an example of

The U.S. approaches used in hostile takeovers is practically nonexistent in most other countries throughout the world including continental Europe and Asia.

The selling of some of a firm's assets for various strategic motives is called divestiture.

A takeover target's management may not support a proposed takeover due to a very high tender offer.

In a voluntary settlement, each creditor will be paid 20 cents on the dollar in 120 days. The remaining 80 cents on the dollar will be paid within an additional 60 days. This is an example of

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, both the acquiring and the target companies have the same

In defending against a hostile takeover, the strategy that involves the target firm finding a more suitable acquirer and prompting it to compete with the initial hostile acquirer to take over the firm is called the ________ strategy.

A combination of companies where the former corporations cease to exist is

Strategic mergers seek to achieve various economies of scale by eliminating redundant functions, increasing market share, and improving raw material sourcing and finished product distribution.

When making a cash acquisition of a going concern, the acquiring corporation must be certain

Tangshan Mining is attempting to acquire Zhengsen Mining. Selected financial data is presented for both companies in the table below: Tangshan Mining has sufficient authorized but unissued shares to carry out the proposed merger. If the ratio of exchange is 1.8, what will be the EPS of the merged firm?

An operating merger occurs when the operations of the acquiring and target firms are combined in order to achieve economies and thereby cause the performance of the merged firm to exceed that of the pre-merged firm.

A tender offer is a formal offer to purchase a given number of shares of a firm's stock at a specified price.

One of the key attributes that makes a firm a good candidate for an LBO is that it has a relatively low level of debt and a high level of relatively liquid assets that could be used as loan collateral.

A firm that wants to expand or extend its operations in existing or new product areas may avoid many of the risks associated with the design, manufacture, and sale of additional or new product and remove a potential competitor by acquiring a suitable going concern.

An attempt to gain control of the firm by buying sufficient shares of the target firm in the marketplace is known as a ________ and is typically accomplished through a ________.

When a merger transaction is endorsed by the target firm's management, approved by its shareholders, and easily consummated, this is an example of

The actual ratio of exchange in a stock-exchange acquisition is the ratio of the amount paid per share of the target company to the per-share market price of the acquiring firm.