Chapter 29 mcq - Copy.pdf

Chapter 29 mcq

1. 29-1
CHAPTER 29
Mergers and Acquisitions

Multiple Choice Questions:

I. DEFINITIONS

MERGER
a 1. The complete absorption of one company by another, wherein the acquiring firm retains its
identity and the acquired firm ceases to exist as a separate entity, is called a:
a. merger.
b. consolidation.
c. tender offer.
d. spinoff.
e. divestiture.

Difficulty level: Easy

CONSOLIDATION
b 2. A merger in which an entirely new firm is created and both the acquired and acquiring firms
cease to exist is called a:
a. divestiture.
b. consolidation.
c. tender offer.
d. spinoff.
e. conglomeration.

Difficulty level: Easy

TENDER OFFER
c 3. A public offer by one firm to directly buy the shares of another firm is called a:
a. merger.
b. consolidation.
c. tender offer.
d. spinoff.
e. divestiture.

Difficulty level: Easy

HORIZONTAL ACQUISITION
d 4. The acquisition of a firm in the same industry as the bidder is called a _____ acquisition.
a. conglomerate
b. forward
c. backward
d. horizontal
e. vertical

Difficulty level: Easy

2. 29-2
VERTICAL ACQUISITION
e 5. The acquisition of a firm involved with a different production process stage than the bidder is
called a _____ acquisition.
a. conglomerate
b. forward
c. backward
d. horizontal
e. vertical

Difficulty level: Easy

CONGLOMERATE ACQUISITION
a 6. The acquisition of a firm whose business is not related to that of the bidder is called a _____
acquisition.
a. conglomerate
b. forward
c. backward
d. horizontal
e. vertical

Difficulty level: Easy

PROXY CONTEST
b 7. An attempt to gain control of a firm by soliciting a sufficient number of stockholder votes to
replace the current board of directors is called a:
a. tender offer.
b. proxy contest.
c. going-private transaction.
d. leveraged buyout.
e. consolidation.

Difficulty level: Easy

GOING-PRIVATE TRANSACTION
c 8. A business deal in which all publicly owned stock in a firm is replaced with complete equity
ownership by a private group is called a:
a. tender offer.
b. proxy contest.
c. going-private transaction.
d. leveraged buyout.
e. consolidation.

Difficulty level: Easy

3. 29-3
LEVERAGED BUYOUT
d 9. Going-private transactions in which a large percentage of the money used to buy the
outstanding stock is borrowed is called a:
a. tender offer.
b. proxy contest.
c. merger.
d. leveraged buyout.
e. consolidation.

Difficulty level: Easy

SYNERGY
e 10. The positive incremental net gain associated with the combination of two firms through a
merger or acquisition is called:
a. the agency conflict.
b. goodwill.
c. the merger cost.
d. the consolidation effect.
e. synergy.

Difficulty level: Easy

SUPERMAJORITY AMENDMENT
a 11. A change in the corporate charter making it more difficult for the firm to be acquired by
increasing the percentage of shareholders that must approve a merger offer is called a:
a. supermajority amendment.
b. standstill agreement.
c. greenmail provision.
d. poison pill amendment.
e. white knight provision.

Difficulty level: Easy

STANDSTILL AGREEMENT
b 12. A contract wherein the bidding firm agrees to limit its holdings in the target firm is called a:
a. supermajority amendment.
b. standstill agreement.
c. greenmail provision.
d. poison pill amendment.
e. white knight provision.

Difficulty level: Easy

4. 29-4
GREENMAIL
c 13. The payments made by a firm to repurchase shares of its outstanding stock from an individual
investor in an attempt to eliminate a potential unfriendly takeover attempt are referred to as:
a. a golden parachute.
b. standstill payments.
c. greenmail.
d. a poison pill.
e. a white knight.

Difficulty level: Easy

POISON PILLS
d 14. A financial device designed to make unfriendly takeover attempts financially unappealing, if
not impossible, is called:
a. a golden parachute.
b. a standstill agreement.
c. greenmail.
d. a poison pill.
e. a white knight.

Difficulty level: Easy

GOLDEN PARACHUTES
a 15. Generous compensation packages paid to a firm’s top management in the event of a takeover
are referred to as:
a. golden parachutes.
b. poison puts.
c. white knights.
d. shark repellents.
e. bear hugs.

Difficulty level: Easy

WHITE KNIGHTS
c 16. A friendly suitor that a target firm turns to as an alternative to a hostile bidder is called a:
a. golden suitor.
b. poison put.
c. white knight.
d. shark repellent.
e. crown jewel.

Difficulty level: Easy

5. 29-5
EQUITY CARVE-OUT
b 17. The sale of stock in a wholly owned subsidiary via an initial public offering is referred to as
a(n):
a. split-up.
b. equity carve-out.
c. countertender offer.
d. white knight transaction.
e. lockup transaction.

Difficulty level: Medium

SPIN-OFF
d 18. The distribution of shares in a subsidiary to existing parent company stockholders is called a(n):
a. lockup transaction.
b. bear hug.
c. equity carve-out.
d. spin-off.
e. split-up.

Difficulty level: Medium

II. CONCEPTS

ACQUISITIONS
a 19. Which of the following statements concerning acquisitions are correct?
I. Being acquired by another firm is an effective method of replacing senior management.
II. The net present value of an acquisition should have no bearing on whether or not the
acquisition occurs.
III. Acquisitions are often relatively complex from an accounting and tax point of view.
IV. The value of a strategic fit is easy to estimate using discounted cash flow analysis.
a. I and III only
b. II and IV only
c. I and IV only
d. I, III, and IV only
e. I, II, III, and IV

Difficulty level: Medium

MERGER
b 20. In a merger the:
a. legal status of both the acquiring firm and the target firm is terminated.
b. acquiring firm retains its name and legal status.
c. acquiring firm acquires the assets but not the liabilities of the target firm.
d. stockholders of the target firm have little, if any, say as to whether or not the merger occurs.
e. target firm continues to exist as a subsidiary of the acquiring firm.

Difficulty level: Medium

6. 29-6
VERTICAL ACQUISITION
d 21. When a building supply store acquires a lumber mill it is making a ______ acquisition.
a. horizontal
b. longitudinal
c. conglomerate
d. vertical
e. complementary resources

Difficulty level: Easy

STOCK ACQUISITION
c 22. If Microsoft were to acquire U.S. Airways, the acquisition would be classified as a _____
acquisition.
a. horizontal
b. longitudinal
c. conglomerate
d. vertical
e. complementary resources

Difficulty level: Easy

TAKEOVERS
e 23. Which of the following activities are commonly associated with takeovers?
I. the acquisition of assets
II. proxy contests
III. management buyouts
IV. leveraged buyouts
a. I and III only
b. II and IV only
c. I, III, and IV only
d. I, II, and IV only
e. I, II, III, and IV

Difficulty level: Medium

TAXES AND ACQUISITIONS
c 24. In a tax-free acquisition, the shareholders of the target firm:
a. receive income that is considered to be tax-exempt.
b. gift their shares to a tax-exempt organization and therefore have no taxable gain.
c. are viewed as having exchanged their shares.
d. sell their shares to a qualifying entity thereby avoiding both income and capital gains taxes.
e. sell their shares at cost thereby avoiding the capital gains tax.

Difficulty level: Medium

7. 29-7
PURCHASE ACCOUNTING METHOD
d 25. The purchase accounting method for mergers require that:
a. the excess of the purchase price over the fair market value of the target firm be recorded as a
one-time expense on the income statement of the acquiring firm.
b. goodwill be amortized on a yearly basis.
c. the equity of the acquiring firm be reduced by the excess of the purchase price over the fair
market value of the target firm.
d. the assets of the target firm be recorded at their fair market value on the balance sheet of the
acquiring firm.
e. the excess amount paid for the target firm be recorded as a tangible asset on the books of the
acquiring firm.

Difficulty level: Medium

SYNERGY
d 26. A proposed acquisition may create synergy by:
I. increasing the market power of the combined firm.
II. improving the distribution network of the acquiring firm.
III. providing the combined firm with a strategic advantage.
IV. reducing the utilization of the acquiring firm’s assets.
a. I and III only
b. II and III only
c. I and IV only
d. I, II, and III only
e. I, II, III, and IV

Difficulty level: Medium

ACQUISITION GAINS
c 27. Which of the following represent potential tax gains from an acquisition?
I. a reduction in the level of debt
II. an increase in surplus funds
III. the use of net operating losses
IV. an increased use of leverage
a. I and IV only
b. II and III only
c. III and IV only
d. I and III only
e. II, III, and IV only

Difficulty level: Medium

ACQUISTION CONSIDERATIONS
c 28. When evaluating an acquisition, you should:
a. concentrate on book values and ignore market values.
b. focus on the total cash flows of the merged firm.
c. apply the rate of return that is relevant to the incremental cash flows.
d. ignore any one-time acquisition fees or transaction costs.
e. ignore any potential changes in management.

Difficulty level: Medium

8. 29-8
ACQUISITIONS AND EARNINGS PER SHARE
b 29 If an acquisition does not create value, then the:
a. earnings per share of the acquiring firm must be the same both before and after the acquisition.
b. earnings per share can change but the stock price of the acquiring firm should remain constant.
c. price per share of the acquiring firm should increase because of the growth of the firm.
d. earnings per share will most likely increase while the price-earnings ratio remains constant.
e. price-earnings ratio should remain constant regardless of any changes in the earnings per share.

Difficulty level: Medium

COMPLEMENTARY RESOURCES
b 30. Which one of the following combinations of firms would benefit the most through the use of
complementary resources?
a. a ski resort and a travel trailer sales outlet
b. a golf resort and a ski resort
c. a hotel and a home improvement center
d. a swimming pool distributor and a kitchen designer
e. a fast food restaurant and a dry cleaner

Difficulty level: Medium

COMPLEMENTARY RESOURCES
a 31. Which one of the following is most likely a good candidate for an acquisition that could benefit
from the use of complementary resources?
a. a sports arena that is home only to an indoor hockey team
b. a hotel in a busy downtown business district of a major city
c. a day care center located near a major route into the main business district of a large city
d. an amusement park located in a centralized Florida location
e. a fast food restaurant located near a major transportation hub

Difficulty level: Medium

INEFFICIENT MANAGEMENT
a 32. The shareholders of a target firm benefit the most when:
a. an acquiring firm has the better management team and replaces the target firm’s managers.
b. the management of the target firm is more efficient than the management of the acquiring firm
which replaces them.
c. the management of both the acquiring firm and the target firm are as equivalent as possible.
d. their current management team is kept in place even though the managers of the acquiring firm
are more suited to manage the target firm’s situation.
e. their management team is technologically knowledgeable yet ineffective.

Difficulty level: Medium

9. 29-9
ACQUISITION GAINS
c 33. Which of the following represent potential gains from an acquisition?
I. the replacement of ineffective managers
II. lower costs per unit produced
III. an increase in firm size so that diseconomies of scale are realized
IV. spreading of overhead costs
a. II and III only
b. I and IV only
c. I, II, and IV only
d. I, III, and IV only
e. I, II, III, and IV

Difficulty level: Medium

COST OF AN ACQUISITION
a 34. The value of a target firm to the acquiring firm is equal to:
a. the value of the target firm as a separate entity plus the incremental value derived from the
acquisition.
b. the purchase cost of the target firm.
c. the value of the merged firm minus the value of the target firm as a separate entity.
d. the purchase cost plus the incremental value derived from the acquisition.
e. the incremental value derived from the acquisition.

Difficulty level: Easy

CASH VERSUS STOCK ACQUISITION
c 35. Which one of the following statements is correct?
a. If an acquisition is made with cash, then the cost of that acquisition is dependent upon the
acquisition gains.
b. Acquisitions made by exchanging shares of stock are normally taxable transactions.
c. The management of an acquiring firm may put itself at risk of losing control of the firm if they
make acquisitions using shares of stock.
d. The stockholders of the acquiring firm will be better off when an acquisition results in losses if
the acquisition was made with cash rather than with stock.
e. Acquisitions based on legitimate business purposes are not taxable transactions regardless of
the means of financing used.

Difficulty level: Medium

DEFENSIVE TACTICS
c 36. If a firm wants to take over another firm but feels the attempt to do so will be viewed as
unfriendly it could decide to take a _____ approach to the acquisition.
a. crown jewel
b. shark repellent
c. bear hug
d. countertender offer
e. lockup

Difficulty level: Medium

10. 29-10
DIVESTITURES AND RESTRUCTURINGS
e 37. Which of the following are reasons why a firm may want to divest itself of some of its assets?
I. to raise cash
II. to get rid of unprofitable operations
III. to get rid of some assets received in an acquisition
IV. to cash in on some profitable operations
a. I and II only
b. I, II, and III only
c. I, III, and IV only
d. II, III, and IV only
e. I, II, III, and IV

Difficulty level: Medium

DIVESTITURES AND RESTRUCTURINGS
a 38. Which one of the following statements is correct?
a. A spin-off frequently follows an equity carve-out.
b. A split-up frequently follows a spin-off.
c. An equity carve-out is a specific type of acquisition.
d. A spin-off involves an initial public offering.
e. A divestiture means that the original firm ceases to exist.

Difficulty level: Medium

REASON FOR MERGER
a 39. In a merger or acquisition, a firm should be acquired if it:

a. generates a positive net present value to the shareholders of an acquiring firm.
b. is a firm in the same line of business, in which the acquirer has expertise.
c. is a firm in a totally different line of business which will diversity the firm.
d. pays a large dividend which will provide cash pass through to the acquiror.
e. None of the above.

Difficulty level: Medium

SYNERGY
d 40. A reason for acquisitions is synergy. Synergy includes:
a. revenue enhancements.
b. cost reductions.
c. lower taxes.
d. All of the above.
e. None of the above.

Difficulty level: Medium

11. 29-11
ACQUISITION OF STOCK
b 41. One company wishes to acquire another. Which of the following forms of acquisition does not
require a formal vote by the shareholders of the acquired firm?
a. Merger
b. Acquisition of stock
c. Acquisition of assets
d. Consolidation
e. All of the above require a formal vote.

Difficulty level: Medium

CONSOLIDATION
d 42. Firm A and Firm B join to create Firm AB. This is an example of:
a. a tender offer.
b. an acquisition of assets.
c. an acquisition of stock.
d. a consolidation.
e. Both B and C.

Difficulty level: Medium

HORIZONTAL MERGER

a 43. Suppose that Verizon and Sprint were to merge. Ignoring potential antitrust problems, this
merger would be classified as a:
a. horizontal merger.
b. vertical merger.
c. conglomerate merger.
d. monopolistic merger.
e. None of the above.

Difficulty level: Easy

CONGLOMERATE MERGER
d 44. Suppose that General Motors has made an offer to acquire General Mills. Ignoring potential
antitrust problems, this merger would be classified as a:
a. monopolistic merger.
b. horizontal merger.
c. vertical merger.
d. conglomerate merger.
e. None of the above.

Difficulty level: Easy

12. 29-12
VERTICAL MERGER
b 45. Suppose that Exxon-Mobil acquired Schlumberger, an exploration/drilling company. Ignoring
potential antitrust problems, this merger would be classified as a:
a. monopolistic merger.
b. vertical merger.
c. conglomerate merger.
d. horizontal merger.
e. None of the above.

Difficulty level: Easy

PROXY CONTEST

c 46. A dissident group solicits votes in an attempt to replace existing management. This is called a:
a. tender offer.
b. shareholder derivative action.
c. proxy contest.
d. management freeze-out.
e. shareholder's revenge.

Difficulty level: Easy

VERTICAL ACQUISITION
c 47. If the All-Star Fuel Filling Company, a chain of gasoline stations acquire the Mid-States
Refining Company, a refiner of oil products, this would be an example of a:
a. conglomerate acquisition.
b. white knight.
c. vertical acquisition.
d. going-private transaction.
e. horizontal acquisition.

Difficulty level: Easy

TENDERING STOCK
d 48. Which of the following is not true of an acquisition of stock or tender offers?
a. No stockholder meetings need to be held.
b. No vote is required.
c. The bidding firm deals directly with the stockholders of the target firm.
d. In most cases, 100% of the stock of the target firm is tendered.
e. All of the above are true of tender offers.

Difficulty level: Medium

13. 29-13
GOING PRIVATE
d 49. When the management and/or a small group of investors take over a firm and the shares of the
firm are delisted and no longer publicly available, this action is known as a:
a. consolidation.
b. vertical acquisition.
c. proxy contest.
d. going-private transaction.
e. None of the above.

Difficulty level: Easy

REASON FOR MERGER
d 50. One of the most basic reasons for a merger is:
a. revenue enhancing in the hopes that net losses may decrease.
b. increased competition.
c. employee benefits.
d. cost reductions.
e. to keep lawyers and accountants employed.

Difficulty level: Medium

DISCOUNT RATE

c 51. Cowboy Curtiss' Cowboy Hat Company recently completed a merger. When valuing the
combined firm after the merger, which of the following is an example of the type of common
mistake that can occur?
a. The use of market values in valuing either the new firm.
b. The inclusion of cash flows that are incremental to the decision.
c. The use of Curtiss' discount rate when valuing the cash flows of the entire company.
d. The inclusion of all relevant transactions cost associated with the acquisition.
e. None of the above.

Difficulty level: Medium

III. PROBLEMS

GOODWILL
b 52. Turner, Inc. has $4.2 million in net working capital. The firm has fixed assets with a book value
of $48.6 million and a market value of $53.4 million. Martin & Sons is buying Turner, Inc. for
$60 million in cash. The acquisition will be recorded using the purchase accounting method.
What is the amount of goodwill that Martin & Sons will record on its balance sheet as a result
of this acquisition?
a. $0
b. $2.4 million
c. $6.6 million
d. $7.2 million
e. $11.4 million

Difficulty level: Medium

14. 29-14
MERGER PREMIUM
a 53. Rudy’s, Inc. and Blackstone, Inc. are all-equity firms. Rudy’s has 1,500 shares outstanding at a
market price of $22 a share. Blackstone has 2,500 shares outstanding at a price of $38 a share.
Blackstone is acquiring Rudy’s for $36,000 in cash. What is the merger premium per share?
a. $2.00
b. $4.25
c. $6.50
d. $8.00
e. $14.00

Difficulty level: Medium


MERGER PREMIUM
b 54. Jennifer’s Boutique has 2,100 shares outstanding at a market price per share of $26. Sally’s has
3,000 shares outstanding at a market price of $41 a share. Neither firm has any debt. Sally’s is
acquiring Jennifer’s for $58,000 in cash. What is the merger premium per share?
a. $1.43
b. $1.62
c. $1.81
d. $2.04
e. $2.07

Difficulty level: Medium

VALUE OF FIRM B TO A
c 55. Jennifer’s Boutique has 2,100 shares outstanding at a market price per share of $26. Sally’s has
3,000 shares outstanding at a market price of $41 a share. Neither firm has any debt. Sally’s is
acquiring Jennifer’s for $58,000 in cash. The incremental value of the acquisition is $2,500.
What is the value of Jennifer’s Boutique to Sally’s?
a. $26,000
b. $27,600
c. $57,100
d. $58,200
e. $60,500

Difficulty level: Medium

VALUE OF FIRM B TO A
d 56. Rudy’s, Inc. and Blackstone, Inc. are all-equity firms. Rudy’s has 1,500 shares outstanding at a
market price of $22 a share. Blackstone has 2,500 shares outstanding at a price of $38 a share.
Blackstone is acquiring Rudy’s for $36,000 in cash. The incremental value of the acquisition is
$3,500. What is the value of Rudy’s Inc. to Blackstone?
a. $30,000
b. $32,500
c. $33,000
d. $36,500
e. $39,500

Difficulty level: Medium

15. 29-15
CASH ACQUISITION
b 57. ABC and XYZ are all-equity firms. ABC has 1,750 shares outstanding at a market price of $20
a share. XYZ has 2,500 shares outstanding at a price of $28 a share. XYZ is acquiring ABC for
$36,000 in cash. The incremental value of the acquisition is $3,000. What is the net present
value of acquiring ABC to XYZ?
a. $1,000
b. $2,000
c. $3,000
d. $4,000
e. $5,000

Difficulty level: Medium

CASH ACQUISITION
d 58. Firm A is acquiring Firm B for $40,000 in cash. Firm A has 2,500 shares of stock outstanding
at a market value of $18 a share. Firm B has 1,500 shares of stock outstanding at a market price
of $25 a share. Neither firm has any debt. The net present value of the acquisition is $2,500.
What is the value of Firm A after the acquisition?
a. $40,000
b. $42,500
c. $45,000
d. $47,500
e. $50,000

Difficulty level: Medium

CASH ACQUISITION
c 59. Firm A is acquiring Firm B for $25,000 in cash. Firm A has 2,000 shares of stock outstanding
at a market value of $21 a share. Firm B has 1,200 shares of stock outstanding at a market price
of $17 a share. Neither firm has any debt. The net present value of the acquisition is $1,500.
What is the price per share of Firm A after the acquisition?
a. $21.00
b. $21.25
c. $21.75
d. $22.00
e. $22.50

Difficulty level: Medium

CASH ACQUISITION
a 60. Alto and Solo are all-equity firms. Alto has 2,400 shares outstanding at a market price of $24 a
share. Solo has 4,000 shares outstanding at a price of $17 a share. Solo is acquiring Alto for
$63,000 in cash. The incremental value of the acquisition is $5,500. What is the net present
value of acquiring Alto to Solo?
a. $100
b. $400
c. $1,200
d. $2,400
e. $5,500

Difficulty level: Medium

16. 29-16
CASH ACQUISITION
c 61. Principal, Inc. is acquiring Secondary Companies for $29,000 in cash. Principal has 2,500
shares of stock outstanding at a market price of $30 a share. Secondary has 1,600 shares of
stock outstanding at a market price of $15 a share. Neither firm has any debt. The net present
value of the acquisition is $4,500. What is the price per share of Principal after the acquisition?
a. $30.00
b. $30.70
c. $31.80
d. $32.10
e. $32.50

Difficulty level: Medium

STOCK ACQUISITION
c 62. Winslow Co. has agreed to be acquired by Ferrier, Inc. for $25,000 worth of Ferrier stock.
Ferrier currently has 1,500 shares of stock outstanding at a price of $21 a share. Winslow has
1,000 shares outstanding at a price of $22. The incremental value of the acquisition is $4,000.
What is the merger premium per share?
a. $1
b. $2
c. $3
d. $4
e. $5

Difficulty level: Medium

STOCK ACQUISITION
e 63. Brite Industries has agreed to merge with Nu-Day, Inc. for $20,000 worth of Nu-Day stock.
Brite has 1,200 shares of stock outstanding at a price of $15 a share. Nu-Day has 2,000 shares
outstanding with a market value of $19 a share. The incremental value of the acquisition is
$3,500. What is the value of Nu-Day after the merger?
a. $53,000
b. $54,250
c. $56,000
d. $57,750
e. $59,500

Difficulty level: Medium

STOCK ACQUISITION
a 64. Goodday & Sons is being acquired by Baker, Inc. for $19,000 worth of Baker stock. Baker has
1,500 shares of stock outstanding at a price of $25 a share. Goodday has 1,000 shares
outstanding with a market value of $16 a share. The incremental value of the acquisition is
$2,000. How many new shares of stock will be issued to complete this acquisition?
a. 760.0 shares
b. 840.0 shares
c. 960.0 shares
d. 1,187.5 shares
e. 1,312.5 shares

Difficulty level: Medium

17. 29-17

STOCK ACQUISITION
e 65. Holiday & Sons is being acquired by Miller’s, Inc. for $20,000 worth of Miller’s stock. Miller
has 1,300 shares of stock outstanding at a price of $20 a share. Holiday has 1,000 shares
outstanding with a market value of $18 a share. The incremental value of the acquisition is
$2,000. What is the total number of shares in the new firm?
a. 1,000 shares
b. 1,300 shares
c. 1,500 shares
d. 2,000 shares
e. 2,300 shares

Difficulty level: Medium

STOCK ACQUISITION
d 66. Firm A is being acquired by Firm B for $24,000 worth of Firm B stock. The incremental value
of the acquisition is $3,500. Firm A has 1,500 shares of stock outstanding at a price of $15 a
share. Firm B has 1,200 shares of stock outstanding at a price of $30 a share. What is the value
per share of Firm B after the acquisition?
a. $17.50
b. $24.00
c. $30.00
d. $31.00
e. $35.00

Difficulty level: Medium

STOCK ACQUISITION
b 67. Firm X is being acquired by Firm Y for $35,000 worth of Firm Y stock. The incremental value
of the acquisition is $2,500. Firm X has 2,000 shares of stock outstanding at a price of $16 a
share. Firm Y has 1,200 shares of stock outstanding at a price of $40 a share. What is the actual
cost of the acquisition using company stock?
a. $34,750
b. $34,789
c. $35,000
d. $35,289
e. $35,500

Difficulty level: Challenge

18. 29-18
STOCK ACQUISITION
c 68. Firm Q is being acquired by Firm S for $30,000 worth of Firm S stock. The incremental value
of the acquisition is $2,000. Firm Q has 1,900 shares of stock outstanding at a price of $15 a
share. Firm S has 1,500 shares of stock outstanding at a price of $40 a share. What is the net
present value of the acquisition given that the actual cost of the acquisition using company
stock is $30,167?
a. $167
b. $225
c. $333
d. $425
e. $433

Difficulty level: Challenge

EARNINGS AND VALUATION
d 69. The Sligo Co. is planning on merging with the Thorton Co. Sligo will pay Thorton’s
stockholders the current value of their stock in shares of Sligo. Sligo currently has 2,300 shares
of stock outstanding at a market price of $20 a share. Thorton has 1,800 shares outstanding at a
price of $15 a share. How many shares of stock will be outstanding in the merged firm?
a. 1,800 shares
b. 2,300 shares
c. 2,750 shares
d. 3,650 shares
e. 4,100 shares

Difficulty level: Medium

EARNINGS AND VALUATION
b 70. Firm A is planning on merging with Firm B. Firm A will pay Firm B’s stockholders the current
value of their stock in shares of Firm A. Firm A currently has 2,300 shares of stock outstanding
at a market price of $20 a share. Firm B has 1,800 shares outstanding at a price of $15 a share.
The after-merger earnings will be $6,500. What will the earnings per share be after the merger?
a. $1.67
b. $1.78
c. $1.83
d. $1.87
e. $1.92

Difficulty level: Medium

19. 29-19
EARNINGS AND VALUATION
a 71. Firm A is planning on merging with Firm B. Firm A will pay Firm B’s stockholders the current
value of their stock in shares of Firm A. Firm A currently has 2,300 shares of stock outstanding
at a market price of $20 a share. Firm B has 1,800 shares outstanding at a price of $15 a share.
What is the value of the merged firm?
a. $73,000
b. $75,000
c. $76,667
d. $77,778
e. $78,000

Difficulty level: Medium

EARNINGS AND VALUATION
d 72. Firm A is planning on merging with Firm B. Firm A will pay Firm B’s stockholders the current
value of their stock in shares of Firm A. Firm A currently has 2,300 shares of stock outstanding
at a market price of $20 a share. Firm B has 1,800 shares outstanding at a price of $15 a share.
What is the value per share of the merged firm?
a. $19.00
b. $19.18
c. $19.44
d. $20.00
e. $20.33

Difficulty level: Challenge

SYNERGY

b 73. Firm V was worth $450 and Firm A had a market value of $375. Firm V acquired Firm A for
$425 because they thought the combination of the new Firm VA was worth $925. What is the
synergy from the merger of Firm V and Firm A?
a. $50
b. $100
c. $475
d. $500
e. None of the above.

Difficulty level: Easy

NPV OF MERGER
b 74. Firm V was worth $450 and Firm A had a market value of $375. Firm V acquired Firm A for
$425 because they thought the combination of the new Firm VA was worth $925. What is the
NPV from the merger of Firm V and Firm A?
a. $0
b. $50
c. $425
d. $450
e. None of the above.

Difficulty level: Medium

20. 29-20
IV. ESSAYS

MERGER GAINS
75. The empirical evidence strongly indicates that the stockholders of the target firm realize large wealth
gains as a result of a takeover bid but the stockholders in the acquiring firm gain little, if anything.
Although there exists no definitive answer as to why this is the case, several possible explanations
have been proposed. List and explain three of these possible explanations for the minimal returns to
the acquiring firm’s stockholders.

Size differentials, competition in the takeover market, lack of achieving merger gains, management
goals other than the best interests of the shareholders, and early announcements of corporate
acquisition intent are all presented as possible explanations in the textbook.

FORMS OF ACQUISITION
76. Describe the three basic legal procedures that one firm can use to acquire another and briefly discuss
the advantages and disadvantages of each.

The three forms are merger, acquisition of stock, and acquisition of assets. A merger has the
advantage that it is legally simple and therefore low cost but it has the disadvantage that it must be
approved by the shareholders of both firms. Acquisition by stock requires no shareholder meetings
and management of the target firm can be bypassed. However, it can be a costly form of acquisition
and minority shareholders may hold out, thereby raising the cost of the purchase. An acquisition of
assets requires the vote of the target firm’s shareholders. However, it can become quite costly to
transfer title to all of the assets.

MANAGEMENT INTENT
77. Sometimes the management of a target firm fights a takeover attempt even when that attempt
appears to be in the best interest of the shareholders. Why would management take this stance?

Often, the management of the target firm is replaced after an acquisition. If management believes
this may be the case, they may fight the takeover attempt in an effort to maintain their current
positions. In other cases, management may fight the attempt if they feel that by doing so, they may
increase the amount paid by the acquiring firm.

POISON PILLS
78. Defensive merger tactics are designed to thwart unwanted takeovers and mergers. Do such activities
work to the advantage of stockholders all of the time? Are these types of activities ethical? Who do
you think benefits most from these activities?

Good answers will acknowledge that defensive tactics “insulate” existing management from the
vagaries of the marketplace and may allow ineffective management to remain in charge. Obviously,
defensive maneuvers do not always act in the best interest of shareholders and many students will
argue that management benefits most from these activities. The ethics debate about these issues is
always an interesting one.

21. 29-21
SOLUTIONS TO TEST BANK PROBLEMS

Chapter 29

52. Goodwill = $60m – ($4.2m + $53.4m) = $2.4m
53. Merger premium per share = ($36,000 ÷ 1,500) – $22 = $2
54. Merger premium per share = ($58,000 ÷ 2,100) – $26 = $1.62
55. Value of Jennifer’s to Sally’s = (2,100 × $26) + $2,500 = $57,100
56. Value of Rudy’s to Blackstone = (1,500 × $22) + $3,500 = $36,500
57. NPV = (1,750 × $20) + $3,000 − $36,000 = $2,000
58. Value of A = (2,500 × $18) + $2,500 = $47,500
59. Price per share of A = [(2,000 × $21) + $1,500] ÷ 2,000 = $21.75
60. NPV = (2,400 × $24) + $5,500 − $63,000 = $100
61. Price per share = [(2,500 × $30) + $4,500] ÷ 2,500 = $31.80
62. Merger premium per share = ($25,000 ÷ 1,000) − $22 = $3
63. Value after merger = (1,200 × $15) + (2,000 × $19) + $3,500 = $59,500
64. Number of shares issued = $19,000 ÷ $25 = 760 shares
65. Total number of shares = 1,300 + ($20,000 ÷ $20) = 2,300 shares
66. Value per share = [(1,200 × $30) + (1,500 × $15) + $3,500] ÷ [1,200 + ($24,000 ÷ $30)]
= $62,000 ÷ 2,000 = $31.00
67. Number of shares issued = $35,000 ÷ $40 = 875 shares; Value per share after merger = [(1,200 ×
$40) + (2,000 × $16) + $2,500] ÷ [1,200 + 875] = $82,500 ÷ 2,075 = $39.75904; Actual cost of
acquisition = 875 × $39.75904 = $34,789.16 = $34,789
68. Net present value = [(1,900 × $15) + $2,000] − $30,167 = $30,500 − $30,167 = $333
69. Number of shares = 2,300 + (1,800 × $15 ÷ $20) = 3,650 shares
70. Number of shares = 2,300 + (1,800 × $15 ÷ $20) = 3,650; Earnings per share = $6,500 ÷
3,650 = $1.78
71. Value of merged firm = (2,300 ×
$20) + (1,800 × $15) = $73,000
72. Value per share = [(2,300 × $20) + (1,800 × $15)] ÷ [2,300 + (1,800 × $15 ÷ $20)] =
$73,000 ÷ 3,650 = $20
73. Merger premium = $925 - ($450 + $375) = $100
74. Net Present Value = $925 - $450 - $375 - ($425-$375) = $50

22. 1. A firm that acquires another firm as part of its
strategy to sell off assets, cut costs, and operate the
remaining assets more efficiently is engaging in
__________.
A. a strategic acquisition
B. a financial acquisition
C. two-tier tender offer
D. shark repellent
2. A would-be acquirer's offer to buy stock directly from
shareholders is referred to as __________.
A. a white knight
B. a joint venture
C. a tender offer
D. a takeover
3. The restructuring of a firm should be undertaken if
__________.
A. The restructuring is expected to create value for
shareholders
B. The restructuring is expected to increase earnings per share
(EPS) next year
C. The restructuring is expected to increase the firm’s market share
power within the industry
D. The current employees will receive additional stock option to
align employee interest

4. Economies of scale, market share dominance, and
technological advances are reasons most likely to be
offered to justify a __________.

A. financial acquisition
B. strategic acquisition
C. divestiture
D. supermajority merger approval provision

5 A reason suggested by the authors for a divestiture,
such as a sell-off or spin-off, is __________.

A. economies of scale

23. B. hubris
C. synergy
D. reverse synergy

6 What is the most likely reason that a firm (who is
highly profitable) might consider acquiring a firm that
has had large recent losses and will continue to have
losses into the near future?

A. Hubris
B. White knight.
C. Tax-loss usage
D. Increase assets.

7 Richard Roll makes a case with the __________
hypothesis that takeovers are motivated by bidder
pride and confidence in their abilities relative to
others.

A. hubris
B. efficient markets
C. management success
D. synergy

8 A merger that signals to the investors in the market
place a change in strategy or operating efficiency that
can not be conveyed in another manner is r eferred to
as __________.

A. the information effect
B. the wealth effect
C. strategic effect
D. bootstrapping effect

9 A firm that acquires another firm as part of its overall
business strategy is engaging in __________.

A. a strategic acquisition
B. a financial acquisition
C. a two-tier tender offer
D. a shark repellent

24. 10 The average takeover premium a target firm has
historically received is closest to which of the
following percentages?

A. 5%
B. 12%
C. 30%
D. 80%


11 What remains after we subtract operating costs and
capital expenditures necessary to at least sustain
cash flows from total firm revenues?

A. Free cash flows.
B. Strategic cash flows.
C. Net income.
D. Earnings before interest and taxes (EBIT).


12 How should a successful acquisition be evaluated in
the long-run?

A. The acquisition is successful if the acquirer is able to increase its
earnings per share (EPS), relative to what it would have been
without the acquisition.
B. The acquisition is successful if the acquirer is able to reduce its
debt-to-total asset ratio, and hence risk, relative to what it
would have been without the acquisition.
C. The acquisition is successful if the acquirer is able to diversify its
asset base and reduce its overall risk.
D. The acquisition is successful if the market price of the
acquirer's stock increases over what it would have been
without the acquisition.

13 What is the landmark piece of legislation designed to
promote competition by combating monopolistic
behaviors through antitrust law?

A. The Securities Act of 1933.
B. The Securities Act of 1934.

25. C. The Antitrust Act of 1915.
D. The Clayton Act.

14 A firm can acquire another firm __________.

A. only by purchasing the assets of the target firm
B. only by purchasing the common stock of the target firm
C. by either purchasing the assets or the common equity of
the target firm.
D. None of the above are methods of acquiring the target firm

15 Which of the following hypotheses attempt to
explain the motivation behind creating barriers to
receiving unsolicited takeover offers?

A. Only the managerial entrenchment hypothesis.
B. Only the shareholders' interest hypothesis.
C. Only the takeover barrier hypothesis.
D. Both the first and second answers are hypotheses that
attempt to explain this motivation.

16 What is a business organizational model that
involves the large-scale outsourcing of business
functions?

A. Virtual corporation.
B. Joint venture.
C. Corporate liquidation.
D. Equity carve-out.

17 A bidder that offers a higher price to the first fixed
quantity of shares tendered and a lower second price
for all remaining shares is engaging in __________.

A. a strategic acquisition
B. a financial acquisition
C. a two-tier tender offer
D. shark repellent


18 How do you refer to the public sale of stock in a
subsidiary in which the parent usually retains
majority control?

26. A. Virtual corporation.
B. Joint venture.
C. Corporate liquidation.
D. Equity carve-out.


19 By using a __________, the firm can independently
control considerable assets with a very limited
amount of equity.

A. joint venture
B. leveraged buyout (LBO)
C. spin-off
D. Consolidation

20 As discussed in the text, the creation of a global
24-hour news and information cable network called
MSNBC is an example of a __________.

A. strategic acquisition
B. financial acquisition
C. joint venture
D. virtual corporation

27. Merger Acquisition and Corporate Restructuring 37
M&As. However, companies are going in for strategic alliances, mergers,
acquisitions or even hostile takeovers to gain market power.
Multiple Choice Questions
(1)Which of the following restructuring activities does not result in an
expansion of a firm?
(a)Joint Ventures
(b)Mergers
(c)Divestitures
(d)Acquisitions
(e)None of the above.
(2)Which of the following activities is/are not associated with spin-off?
(a)Creation of a new legal entity
(b)Distribution of shares to a portion of existing shareholders in a
subsidiary in exchange for parent company stock
(c)Distribution of shares on pro rata basis to existing shareholders
of the parent company
(d)Separation of control
(e)All of the above
(3)Firm X plans to sell off a part of the firm via an equity offering to
outsiders. Which of the following means shall be applied by the
company for executing its plan?
(a)Equity Carve-out
(b)Spin-off
(c)Split-Up
(d)Divestiture
(e)Tender Offer.
(4)Changes in the company byelaws to make the acquisition of a
company more difficult or more expensive are referred to as
(a)Takeover
(b)Anti-takeover Amendments
(c)Corporate Control
(d)Proxy Contests
(e)None of the above.
(5)Which of the following activities does not involve a change in the
ownership structure?
(a)Share Repurchase

28. 38 Merger Acquisition and Restructuring
(b)Going Private
(c)Exchange Offers
(d)Leveraged Buyout
(e)Proxy Contest.
(6)Which of the following is referred to as “a going private transaction”
initiated by incumbent management?
(a)Management Buyout
(b)Leveraged Cash out
(c)Management Buy-in
(d)Leveraged Recapitalisation
(e)None of the above.
(7)A transaction which forms one economic unit from two or more
previous units is called
(a)Joint Venture
(b)Merger
(c)Corporate Control
(d)Divestiture
(e)None of the above.
(8)According to Prescott and Visscher, firm specific informational assets
known organisation capital includes
(a)information used in assigning employees to tasks that they can
best fulfill
(b)information used in matching employees for the formation of
teams.
(c)information that each employee acquires about other employees
and about the organisation itself.
(d)Both (a) and (c) above.
(e)All of the above.
(9)Investment opportunities can take the form of
(i)internal investment where there is expansion of existing projects
or the addition of new projects internally
(ii)external investment in the form of mergers
(iii) restructuring.
(a) (i) only
(b) (ii) only
(c) (iii) only

29. Merger Acquisition and Corporate Restructuring 39
(d) Both (i) & (ii) above
(e) All of the above.
Answer (1) c; (2) b; (3) a; (4) b; (5) e;
(6) a; (7) b; (8) e; (9) e;
Theory Questions
(1)Why do corporates go for restructuring exercises? Discuss the various
forms of restructuring exercises that are being practiced by corporates
across the globe.
(2)Mergers are not a new phenomenon, the history of mergers dates
back to the 19th century. Narrate the history of merger movement.
(3)Explain meaning, characteristies and rationale of restructuring.
(4)Explain motives behind merger in details.
(5)Describe the process and steps in strategic Planning of Margers.
(6)What are the visions that should be identified while planning for
M&A?
(7)State the critical activities in strategic planning processes.
(8)Discuss the “5-S” model in details.
(9)Explain “M&A” in India with examples.
(10)Discuss the purposes for restructuring.
Case Study
Read the case study carefully and answer the following question.
(1)What do you mean by internal development/internal growth? What
decides for the company to go for internal growth strategies or
external growth strategies (mergers and acquisitions)?
Internal development and mergers are mutually supportive activities.
Growing companies adopt various forms of M&As and other restructuring
practices depending on the existing opportunities and limitations. The
characteristic and competitive structure of an industry will affect the
strategies employed The factors and situations favouring M&As in part
relate to industry characteristics. In an industry with excess capacity,
horizontal mergers can be used to close down high-cost firms to decrease
industry supply and to boost efficiency in the balance firms. In addition, a
number of industries, earlier operating on small-scale operations, have
been rolled up into bigger units. The larger units have been able to achieve
economies of scale not achieved by smaller individual units.
A few more advantages of M&As or external growth may also be
highlighted. An acquisition helps the acquirer to acquire a firm already in

30. 436 Merger Acquisition and Restructuring
(d) Both (a) and (c) above.
(e) All of the above.
(4)LBO is a purchase aprinate company with
(a)Borrowed fund (b) capital funds
(c)Own funds (d) all of above
(e)None of above
(5)When company managers acquire a large part of the company it is
called
(a)MBI (b) MBO
(c)LBO (d) all of above
(e)None of above
(6)Leveraged Buyout is Undertaken by
(a)Stock purchase format (b) Assets purchase format
(c)Both (i) and (ii) above (d) Either (i) or (ii) above
(e)None of above
(7)Investor in LBOs are referred to as financial buyers who hold their
investment for
(a)3 to5 years (b) 5 to7 years
(c)7 to 9 years (d) 9 to11 years
(e)11 to 13 years
(8)Temporary ownership by an LBO firm can provide an important
bridge to better long term:
(a)Management (b) Performance
(c)Both (i) and (ii) (d) Either(i) or (ii)
(e)None of above
(9)LBO represents bonding activity of
(a)Debt (b) Equity
(c)Debt and Equity (d) Debt or Equity
(e)None of above
10The Purchase Price in LBOs should be slightly above than
(a)Debt (b) Equity
(c)Book (d) Preferance
(e)Debenture

31. Leveraged Buy-out 437
(11)In a LBO,a significant amount of the takeover of the controlling
interest comes from
(a)Own found (b) Mutal fund
(c)Capital fund (d) Borrowed fund
(e)All of above
(12)LBO financing is likely to emerge in India against the backdrop of
the Goverments
(a)Investment Programme (b) Disinvestment Programme
(c)Economic Program (d) All of above
(e)None of above
(13)In a Management Buy In; a new management team replaces the
(a)Incumbent Management (b) Indumbent Mmanagement
(c)Inccummbent Management (d) Incumbbent Management
(e)Incumbennt Management
(14)Disinvestment in a recession tends to be dedensive and driven by
rationalisation and cost cutting whereas in boomtime they are
triggrred by strategic
(a)Replacement (b) Replanning
(c)Restructuring (d) All of above
(e)None of above
(15)Senior debt has priority in payment of
(a)Interest (b) Principal
(c)Interest and Principal (d) Intrest or Principal
(e)None of above
(Answer1) e; 2) c; 3) b; 4) a, 5) b; 6) d;
7) b; 8) c; 9) a, 10) c; 11) d; 12) b,
13) a; 14) c; 15) c.)
Theory Questions:
(1)Explain the concept of LBO and state how it is undertaken
(2)How is LBO an alternative model for Corporate Governance?
(3)Explain different stages of LBO operation
(4)Discuss the methodlogy of financing LBOs and with partucular
reference to India
(5)Explain the managerial motinations of an MBOs
(6)Explain the development stages of LBOs since 1950 with examples

32. Merger Acquisition and Corporate Restructuring 27
Multiple Choice Questions
(1)Which of the following restructuring activities does not result in an
expansion of a firm?
(a)Joint Ventures
(b)Mergers
(c)Divestitures
(d)Acquisitions
(e)None of the above.
(2)Which of the following activities is/are not associated with spin-off?
(a)Creation of a new legal entity
(b)Distribution of shares to a portion of existing shareholders in a
subsidiary in exchange for parent company stock
(c)Distribution of shares on pro rata basis to existing shareholders
of the parent company
(d)Separation of control
(e)All of the above
(3)Firm X plans to sell off a part of the firm via an equity offering to
outsiders. Which of the following means shall be applied by the
company for executing its plan?
(a)Equity Carve-out
(b)Spin-off
(c)Split-Up
(d)Divestiture
(e)Tender Offer.
(4)Changes in the company bylaws to make the acquisition of a company
more difficult or more expensive are referred to as
(a)Takeover
(b)Anti-takeover Amendments
(c)Corporate Control
(d)Proxy Contests
(e)None of the above.
(5)Which of the following activities does not involve a change in the
ownership structure?
(a)Share Repurchase
(b)Going Private

33. 28 Merger Acquisition and Restructuring
(c)Exchange Offers
(d)Leveraged Buyout
(e)Proxy Contest.
(6)Which of the following is referred to as “a going private transaction”
initiated by incumbent management?
(a)Management Buyout
(b)Leveraged Cash out
(c)Management Buy-in
(d)Leveraged Recapitalisation
(e)None of the above.
(7)A transaction which forms one economic unit from two or more
previous units is called
(a)Joint Venture
(b)Merger
(c)Corporate Control
(d)Divestiture
(e)None of the above.
(8)According to Prescott and Visscher, firm specific informational assets
known organisation capital includes
(a)information used in assigning employees to tasks that they can
best fulfill
(b)information used in matching employees for the formation of
teams.
(c)information that each employee acquires about other employees
and about the organisation itself.
(d)Both (a) and (c) above.
(e)All of the above.
(9)Investment opportunities can take the form of
(i)internal investment where there is expansion of existing projects
or the addition of new projects internally.
(ii)external investment in the form of mergers.
(iii) restructuring.
(a) (i) only
(b) (ii) only
(c) (iii) only

34. Merger Acquisition and Corporate Restructuring 29
(d) Both (i) & (ii) above
(e) All of the above.
Answer (1) c; (2) b; (3) a; (4) b; (5) e;
(6) a; (7) b; (8) e; (9) e;
Theory Questions
(1)Why do corporates go for restructuring exercises? Discuss the various
forms of restructuring exercises that are being practiced by corporates
across the globe.
(2)Mergers are not a new phenomenon, the history of mergers dates
back to the 19th century. Narrate the history of merger movement.
(3)Explain meaning, characteristies and rationale of restracturing?
(4)Explain motives behind merger in details?
(5)Describe the process and steps in strategic Planning of Marga
(6)What are the visions should be identified while planning for M&A?
(7)State the critical activities in strategic planning processes?
(8)Discuss the “5-S” model in details?
(9)Explain “M&A” in India with examples?
(10)Discuss the purposes for restructuring?
Case Study
Read the case study carefully and answer the following question.
(1)What do you mean by internal development/internal growth? What
decides for the company to go for internal growth strategies or
external growth strategies (mergers and acquisitions)?
Internal development and mergers are mutually supportive activities.
Growing companies adopt various forms of M&As and other restructuring
practices depending on the existing opportunities and limitations. The
characteristic and competitive structure of an industry will affect the
strategies employed The factors and situations favouring M&As in part
relate to industry characteristics. In an industry with excess capacity,
horizontal mergers call be used to close down high-cost firms to decrease
industry supply and to boost efficiency in the balance firms. In addition, a
number of industries, earlier operating on small-scale operations, have
been rolled up into bigger units. The larger units have been able to achieve
economies of scale not achieved by smaller individual units.
A few more advantages of M&As or external growth may also be
highlighted. An acquisition helps the acquirer to acquire a firm already in
place with a historical track record. Some complexities are still possible, but
can be eased off to some extent by appropriate due diligence. An acquisition

35. 70 Merger Acquisition and Restructuring
Not all A&M fail. Failure is normally due to a bad business model or sloppy
integration. The difficulties in planning and executing A&M make them very
risky. CEOs, in their rush to complete deals should never under-estimate
the risks.
Multiple Choice Questions
(1)A merger of firms engaged at different stages of production but in
the same industry is called
(a)Horizontal Merger
(b)Vertical Merger
(c)Conglomerate Merger
(d)Subsidiary Merger
(e)Reverse Merger.
(2)Financial conglomerate mergers do not engage in which of the
following activities?
(a)Providing a flow of funds to each segment of their operations.
(b)Providing staff expertise and staff service.
(c)Exercising control.
(d)Taking financial risks.
(e)None of the above.
(3)Which of the follawing statements is/are true regarding product
extension mergers?
(a)They broaden the product lines of firms.
(b)They widen the geographic area of operations of the firm.
(c)They are also called concentric mergers.
(d)All of the above.
(e)Both (a) and (c) above.
(4)Concentric mergers differ to managerial conglomerate mergers in
transferability of which of the following functions?
(a)General management functions
(b)Specific management functions
(c)Both Specific and General management functions
(d)Generic management functions
(e)None of the above.
(5)Which of the following statements does a synergy mean?
(a)The merger between two firms.
(b)Acquisition of one firm by another.

36. Various Forms of Restructuring 71
(c)A phenomenon where the total performance of the combined firm
will be greater than the sum of individual parts.
(d)Both (a) and (b) above.
(e)None of the above.
(6)The introductory stage of an industry’s life cycle is associated with
which type of mergers?
(i)Vertical Mergers
(ii)Horizontal Mergers
(iii)Conglomerate Mergers
(iv)Concentric Mergers.
(a)Both (i) & (ii) above
(b)Both (i) & (iii) above
(c)Both (ii) & (iii) above
(d)Both (iii) & (iv) above
(e)All of the above.
Answer: 1) b; 2) b; 3) e; 4) b; 5) c; 6) c;
Applied Theory Questions
(1)Explain the concept of merger Acquisition and Amalgamation?
(2)What are the different types of mergers?
(3)Differentiate between sell-off and spin-off.
(4)Where are the condidates for inplementation of LBO strategy?
(5)State the different types of MLPs? Explain MLP?
(6)List the various uses of ESOPs? How ESOPs help in corporate
restructuring
(7)What is corporate restructuring? What are the major forms in which
it can be carried out?
(8)What do you mean by LBO? Explain its implications?
(9)Compare and contrast the different corporate implications methods?
(10)What are the implications of a corporate spin-off?
(11)How do you define a ‘merger’? Discuss the different types of mergers
with suitable examples.
(12)Discuss the rationale behind mergers and acquisitions.
(13)What are the key drivers that increase the merger activities?
(14)Briefly explain some of the good motives for a merger. Highlight the
difficulty associated with a typical merger.