Which of the following statements regarding merger deals is (are) correct?Choose all correct answer(s)On average, the price of the target increases substantially, while the price of the bidderdoes not increase by much.If the premium paid by the bidder exceeds the expected additional value to be createdthrough the merger, the bidder's share price is likely to drop on the announcement of thebid.A bidder can often acquire a public-listed company for less than its current market value.Synergies are by far the most common justification that bidders give for the premium theypay for a target.

Merger: A merger is an arrangement that combines the operations of two different firms into a single…

Answered: Which of the following statements…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter23: Corporate Restructuring

Section: Chapter Questions

Problem 8P

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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.
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?
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?
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.
The 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 ???
Look at a recent example of a merger announcement, and log on to the website of the acquiring company. What reasons does the acquirer give for buying the target? How does it intend to pay for the target—with cash, shares, or a mixture of the two? Can you work out how much the target’s shareholders will gain from the offer? Is it more or less than would be the case for an average merger? Now log on to finance.yahoo.com and find out what happened to the stock price of the acquiring company when the merger was announced. Were shareholders pleased with the announcement?
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
Which 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 option
What is the term use to describe making successive offers or asking prices in response to a lack of counteroffer in merger negotiation?
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?
Identify which anti-hostile takeover strategies are being described. [S1] A merger will only push through if at least 80% of the outstanding capital stock vote for this decision. [S2] A third entity purchases the remaining 30% shares so that the would-be acquirer cannot increase its ownership of the corporation from 41% to 71%.a. Supermajority provision; White Knightb. Lobster Trap; Creeping Tender Offerc. Lobster Trap; White Knightd. Supermajority provision; Creeping Tender Offer
The following graph represents the Cumulative Average Abnormal Return (CAAR) for the stocks of companies targeted for take-over. Which of the following statements is true? a. In a weak form efficient market, t* is the actual takeover event (i.e. the time when the legal takeover transaction is completed) b. In a semi-strong form efficient market, t* is the takeover announcement event c. In a strong form efficient market, t* is the acquiring company takeover decision event (i.e. the time when an acquiring company decides to launch a takeover) d. (a) & (b) e. (b) & (c)

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