Fundamentals of Financial Management (MindTap Course List)
14th Edition
ISBN: 9781285867977
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Question
Chapter 21, Problem 2Q
Summary Introduction
To discuss: Whether a tender offer is used by the firms and its reasons.
Introduction:
A business organization wherein the members of the organization sells good or services is termed as a firm.
An offer of one company to purchase the stock of another company by directly going to the stockholder is termed as tender offer.
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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.
Define strategic alliance and joint venture, and explain whya company would choose these options over a merger oran acquisition.
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
Chapter 21 Solutions
Fundamentals of Financial Management (MindTap Course List)
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- The combination of resources through a partnership arrangement rather than through a legal combination of the acquiring and target firm is known as a ? a Leveraged Buyout b Joint Venture c Hostile Takeover d Vertical Merger e None of the abovearrow_forwardLook 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?arrow_forwardWhich one of the following statements correctly applies to a merger? Multiple Choice The acquiring firm does not have to seek approval for the merger from its shareholders. The shareholders of the target firm must approve the merger. The acquiring firm will acquire the assets but not the debt of the target firm. The merged firm will have a new company name. The titles to individual assets of the target firm must be transferred into the acquiring firm's name.arrow_forward
- Many companies have serious discussions aboutmerging. Sometimes these discussions lead tomergers, sometimes not. What are some factorsthat should be considered and that affect the likelihood of a merger actually being completed?arrow_forwardTwo 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.arrow_forwardWhat is the term use to describe making successive offers or asking prices in response to a lack of counteroffer in merger negotiation?arrow_forward
- Why might two companies choose to form a strategicalliance rather than pursue a merger or an acquisition?arrow_forwardThe 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 ???arrow_forwarda) 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?arrow_forward
- 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?arrow_forwardCan a Joint venture be converted to merger and consolidation? how would you account for that?arrow_forwardSuppose you are the CEO of a large firm in a service business and you think that by acquiring a certain competing firm, you can generate growth and profits at a greater rate for the combined firm. Youhave asked some financial analysts to study the proposed acquisition/merger. Do you think valuechain analysis would be useful to them? Why or why not?arrow_forward
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