Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Question
Chapter 29, Problem 9CQ
Summary Introduction
To explain:-Whether it makes sense for your company management to favor the lower offer of take over and form of payment that affects your answer.
Merger:
Merger occurs when the shareholders of two or more companies pool the resources of their company into one separate legal entity and as a result a new company comes into existence. Merger is basically the result of merge of two or more companies into one.
Cash vs. Stock Payment Method:
Cash versus stock payment method is one of the methods of payment where the acquiring firm has to decide when do the acquiring firm have to pay with cash or when do the acquiring firm have to pay with stock to the target company.
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Identify which statement is not correct. In a takeover bid to acquire a part or all shares in another company:
Select one:
a.
Friendly merger reduces the chance of overpaying for target’s shares.
b.
Successful acquirer is likely to pay more for target’s shares in scenarios that include multiple rival bidders.
c.
Target company management would not accept an offer where the consideration for target’s shares exceeds the NPV of the merger.
d.
Hostile takeover may result in overpaying for target’s shares.
What is the term use to describe making successive offers or asking prices in response to a lack of counteroffer in merger negotiation?
Why might one company have to complete more due diligence than another in a merger?
A. None of these answers
B. It is important for a company to know what it is buying
C. Acquisitions can be risky
D. If there is a large size discrepancy the merger seems more like an aquis
Knowledge Booster
Similar questions
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- If stock market returns for merged firms are positive, which motives for horizontal merger would be supported? If stock market returns were negative, which motives would be supported? PORarrow_forwardIn your opinion, what is the most compelling justification for a forward stock split?arrow_forwarda) What is a conglomerate merger and why are they more likely to be approved? b) Limit pricing is a strategy where a firm sets a low, but profitable, price to discourage entry. How does that differ from predatory pricing? c) What is "Share the gain, share the pain" theory?arrow_forward
- what are elements of a unsuccessful merger deal and why?arrow_forwardWhich one of the following is probably the most effective means of increasing investors' interest in an IPO? Multiple Choice Extending the lockup period Issuing the IPO through a rights offering Underpricing the IPO Eliminating the quiet period Eliminating the Green Shoe optionarrow_forwardThe minority stakeholders may exchange their P100 par value shares for P400 cash in case they do not agree with the acquisition what type of anti-hostile takeover strategy ???arrow_forward
- Question III: In the following, suppose that neither stock pays a dividend. (a) Suppose you have a call option that permits you to receive one share of Apple by giving up one share of AOL. In what circumstance might you early-exercise this call? (b) Suppose you have a put option that permits you to give up one share of Apple, receiving one share of AOL. In what circumstance might you early-exercise this put? Would there be a loss from not early-exercising if Apple had a zero stock price? (c) Now suppose that Apple is expected to pay a dividend. Which of the above answers will change? Why?arrow_forwardIf a firm wishes to achieve immediate appreciation in earnings per share as a result of a merger, how can this be best accomplished in terms of exchange variables? What is a possible drawback to this approach in terms of long-range considerations?arrow_forwardWhich of the following statements is most CORRECT? Oa. The primary rationale for most operating mergers is synergy. Ob. In most mergers, the benefits of synergy and the premium the acquirer pays over the market price are summed and then divided equally between the shareholders of the acquiring and target firms. Oc. Financial theory says that the choice of how to pay for a merger is really irrelevant because, although it may affect the firm's capital structure, it will not affect its overall required rate of return. Od. The basic rationale for any financial merger is synergy and, thus, the estimation of pro forma cash flows is the single most important part of the analysis. Oe. The acquiring firm's required rate of return in most horizontal mergers will not be affected, because the 2 firms will have similar betas.arrow_forward
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