If 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?
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If 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?
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- The following are sensible motives for mergers EXCEPT: a. Economies of scope b. Reducing firm risk through diversification c. Reducing competition d. Eliminating inefficiencies e. All of the aboveWhy might the portfolio effect of a merger provide a higher valuation for the participating firms?Discuss the underlying theories and empirical evidence on the value creation from horizontal mergers. How do other firm- and deal- characteristics interact with the valuation effects of such mergers?
- a) 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?“Merger may be profitable but are they good for the economy?” Explain your answer towards this statement.If you are planning an acquisition that is motivated by trying to acquire expertise, you are basically seeking to gain intellectual capital. What concerns would you have in structuring the deal and the post-merger integration that would be different from the concerns you would have when buying physical capital?
- A key issue facing financial executives of multinational firms is exposure to exchange rate changes.a. Define exposure, differentiating between accounting and economic exposure. What role does inflation play?b. Describe at least three circumstances under which economic exposure is likely to exist? c. Of what relevance are the international Fisher effect and purchasing power parity to your answers to parts a and b? d. What is exchange risk, as distinct from exposureWhich of the following LEAST accurately describes the advantages of specific types of mergers and acquisitions?a. The catch-all term for the benefits from M&As is synergy.b. A diversified group of business may further acquire other businesses in a conglomerate type of acquisition.c. The acquisition of an entity outside the industry and supporting services will result to decrease in cost of production of the acquirer.d. Financial advantages of M&A include decreased operating costs, increased financial capacity, and combined sales.Do mergers create value? If so, who profits from this value?
- What is a leveraged buyout? It is a type of joint venture. It is an acquisition in which a large acquirer has leverage through bargaining power over a small target. It is an acquisition which is funded from a relatively large amount of debt. It is an acquisition which is funded from a relatively low amount of debt.Which is not a valid, acceptable reason for companies to merge? Synergistic benefits arising from mergers. Reduction in competition resulting from mergers. Acquisition of assets at below replacement value. Attempts to minimize taxes by acquiring a firm with large accumulated losses that can be used immediately. Using surplus cash to acquire another firm and prevent unfavorable tax consequences for shareholders.Why so many mergers fail to produce the expected synergistic gains?
