Exam 18: Corporate Restructuring

Status Investment Bank Inc. is considering acquiring a fifty percent stake in a company that manages mutual funds. This will probably be a:

The most likely reason for forming a conglomerate is ____.

Conglomerate mergers don't generally have significant anticompetitive effects.

The acquisition of a company in which the buyer borrows most of the purchase price using the firm's own assets as collateral is a:

The emergence of the junk bond as a financing tool contributed significantly to the merger and acquisition activity of the 1980s. Describe the junk bond and explain the premise on which its popularity grew. What was the inherent flaw in the rationale?

Ajax Corp recently entered bankruptcy proceedings during which the court decided the firm should be liquidated. Just before the bankruptcy filing, the firm's owners transferred most of its remaining assets into their own names without paying the company anything for them. Creditors are now claiming that those assets should rightfully be used to satisfy their claims. Which of the following is true?

The price at which a merger target's stock is acquired virtually always reflects a premium over its pre-merger market value because:

_____ exists when performance together is better than the sum of separate performances.

A common method of debt restructuring in bankruptcy is the conversion of debt into equity.

The best justification for a merger is:

In general, the greatest economies of scale are possible with ____ mergers.

A merger for diversification is unnecessary from the perspective of stockholders, because they can accomplish the same diversification by selling some of the acquirer's stock and buying some of the target's.

The broad term "corporate restructuring" refers to:

Which of the following would not be a reason for the management of a target company to resist a takeover by an acquiring company?

Which of the following defensive tactics is not appropriate after a takeover attempt is underway?

In a liquidation, the trustee:

Defensive measures to prevent an unfriendly merger do not include:

An LBO is a takeover but not a merger.

Which of the following types of mergers would expand the acquiring firm's market share in its own industry?

A capital structure argument (that leverage increases value) is often used to show that a large acquisition price premium is justified even though the target has little debt before the acquisition.