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Why might the portfolio effect of a merger provide a higher valuation for the participating firms?
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- 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?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?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?
- Discuss the validity of risk diversification as a motivation for companies engaging in merger and acquisition activity?what 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?Discuss how break risk is calculated in merger arbitrage.
- 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?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 aboveDiscuss how time to completion affects merger arbitrage traders’ returns.
- 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?What are the financial effects of firm acquisitions?What are some factors that acquiring firms consider when they set a bid price?
