Which of the following correctly characterizes the risks in merger arbitrage? O A. The strategy is likely to suffer large losses in market downturns. O B. The strategy is likely to suffer small losses in market downturns.
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- Discuss how break risk is calculated in merger arbitrage.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 aboveDiversification is considered a dubious reason for merger because:Select one: a. Risk reduction is achieved by more by bondholders than stockholders b. Personal diversification is possible by the shareholders themselves c. Diversification only minimizes unsystematic risk d. All of the above
- Discuss the validity of risk diversification as a motivation for companies engaging in merger and acquisition activity?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 aquisWhy so many mergers fail to produce the expected synergistic gains?
- Describe some of the positives and negatives from the point of view of both the acquirer and the target in a merger. What is the usual impact on the stock prices of each?Which of the following is NOT normally regarded as being a barrier to hostile takeovers? a. Abnormally high executive compensation. b. Targeted share repurchases. c. Poison pills. d. Shareholder rights provisions. e. Restricted voting rights.What is a typical merger premium paid in a merger or acquisition? What effect does this premium have on the market value of the merger candidate, and when is most of this movement likely to take place?
- Do solve it as soon as possible 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.Which of the following are common takeover tactics? a. Bear hugs b. Open market purchases c. Tender offers d. Litigation e. All of the abovewhat is meant by the value of a potential takeover target as an independent firm ? when can a financial analyst can just use the current market valuation as the starting point for the valuation? what cant they? what is the difference between these two valuation, if any?