Which 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 finan

Which 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 finan

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter10: Long-lived Tangible And Intangible Assets

Section: Chapter Questions

Problem 12Q

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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.
The following are sentences relating to types of mergers and acquisitions. Which is/are true? [S1] Both horizontal and product-extension types of M&A involve catering to the same market group before and after the M&A. [S2] A vertical M&A involves a supplier or buyer of the acting firm as the target firm.a. Only S1 is true.b. Only S2 is true.c. Neither is true.d. Both are true.
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 above
“Reasons for merger that will result in wealth maximization are strategic benefits, market power, economics of scale, economies of vertical integration and taxation benefits”. Describe how any four out of the five factors mentioned may contribute to the success of a merger business exercise
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?
Two large, publicly owned firms are contemplating a merger. No operating synergy isexpected. However, because returns on the two firms are not perfectly positively correlated,the standard deviation of earnings would be reduced for the combined corporation. Onegroup of consultants argues that this risk reduction is sufficient grounds for the merger.Another group thinks that this type of risk reduction is irrelevant because stockholders canhold the stock of both companies and thus gain the risk-reduction benefits without all thehassles and expenses of the merger. Whose position is correct? Explain.
It is often difficult to draw a distinctive line between mergers and takeovers, and the terms tend to be used rather loosely to describe the process by which firms combine. In principle, a merger may be defined as a combination of firms of approximately equal standings on the basis of an agreement between their respective managements who recognize some mutual advantage in he arrangement. A merger can result in a new company being formed or one of the two companies absorbs the other. Required: i. Describe various types of mergers and critically discuss the motives for undertaking mergers and takeover. ii. Identify the organ(s) or institution(s) that regulates/approves the mergers and acquisitions in Tanzania and discuss all steps/procedures to be undertaken by the merging companies in Tanzania as required by the regulator for a merger to be successful. iii. Identify any recent Merger and Acquisition in Tanzania, discuss its type and the motive behind it.
Which one of the following is the least likely reason a company may acquire an ownership interest in another company? Select one: a.To benefit form an overvaluing of assets in the investee company b. To oust an inefficient management team c. To take advantage of operating and/or cost synergies d. To exercise an active role in the business' activities
This distinguishes a business combination from other types of investment transactions. Obtaining of control Acquisition of stocks Acquisition of assets All of these The entity that obtains control over another business in a business combination called the Controller Acquiree Acquirer Controllee Entity A obtained control of Entity B in a business combination. When computing for goodwill, Entity A would least likely account for which of the following? Entity B’s research and development projects that were already charged as expenses, but have a fair value as at the acquisition date. Entity B’s unrecorded identifiable intangible assets Operating lease between Entity A and Entity B, wherein Entity B is the lessee. Entity A’s expected costs of exiting or terminating some or all of Entity B’s activities after the combination. A contingent liability assumed in a business combination Is not accounted for by the acquirer if the contingent liability has an improbable outflow of economic…
Find a recent merger transaction that failed due to regulatory concerns over market share concentration and reduction of consumer alternatives. Do you support the regulatory concerns? Explain briefly the transaction and your reasoning.
It is quite often we observe some firms takeover target firms from a different industry. If diversifying harms firm value and it is more efficient to make diversification at the investor (shareholder) level than at the firm level, why do you think the managements still choose to make diversified acquisitions?