Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Chapter 26, Problem 2Q
Summary Introduction
To determine: The Significance of merger with regard to likelihood of governmental intervention and possibilities of operating synergy.
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Students have asked these similar questions
Four economic classifications of mergers are (1) horizontal, (2) vertical, (3) conglomerate,and (4) congeneric. Explain the significance of these terms in merger analysis with regard to(a) the likelihood of governmental intervention and (b) possibilities for operating synergy.
“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
What are horizontal, vertical, congeneric, andconglomerate mergers? Are the different typesof mergers equally likely to pass muster with theJustice Department?
Chapter 26 Solutions
Intermediate Financial Management (MindTap Course List)
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- Create a table to compare and contrast the three types of corporate mergers: horizontal, vertical, or conglomerate. Describe the characteristics of the corporations that are involved (products, consumers, etc.) and the benefits of this type of merger for each corporation.arrow_forwardDefine synergy. Is synergy a valid rationale for mergers? Describe several situationsthat might produce synergistic gains.arrow_forwardIt 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.arrow_forward
- 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?arrow_forwardSeveral reasons have been proposed to justify mergers. Among the more prominent are (1) tax consideration, (2) risk reduction, (3) control, (4) purchase of assets at below replacement cost, and (5) synergy in general. Which of the reasons are economically justifiable? Which are not? Which fit the situation at hand? Explain.arrow_forwardWhy might two companies choose to form a strategicalliance rather than pursue a merger or an acquisition?arrow_forward
- What is the difference between a merger and a corporate alliance?arrow_forwardtwo companies are considering a merger, state several argument in favour of combinationarrow_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
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