Explore topic-wise MCQs in Mergers and Acquisitions.

Compensation paid to top management in the event of a takeover is called a:

As a defensive maneuver, a firm issues deep-discount bonds that are redeemable at par in the event of an unfriendly takeover. These bonds are an example of:

A modification of the corporate charter that requires 80% shareholder approval for takeover is called a(n):

An example of a shark-repellent charter amendment is:

(I) Supermajority

(II) Waiting period

(III) Poison pill

(IV) Staggered board

A dissident group solicits votes in an attempt to replace existing management. This is called a:

Which of the following factors influence the choice between merger and an acquisition of stock?

(I) Shareholders are dealt with directly to bypass target management and board of directors

(II) In a tender offer, usually some minority shareholders do not tender stopping complete firm absorption

(III) Target management may be unfriendly and resist an offer. Resistance usually makes the stock price higher

What are the tax consequences of a taxable merger?

Suppose that the merger really does increase the value of the combined firms by $20,000 (i.e., PVAB PVA PVB = $20,000). What is the cost of the merger?

Firm A has proposed to acquire Firm B at a price of $20 per share for Firm B's stock. Calculate the gain from the merger.

The PEN Corporation with a book value of $20 million and a market value of $30 million has merged with the CNC Corporation with a book value of $6 million and a market value of $8 million at a price of $9 million. If the transaction is a purchase then the total assets on the books of the new company will be:

Following an acquisition, the acquiring firm's balance sheet shows an asset labeled "goodwill."

What form of merger accounting is being used?

Company A now acquires B by offering one (new) share of A for every two shares of B (that is,after the merger, there are 2500 shares of A outstanding). If investors are aware that there are no economic gains from the merger, what is the price-earnings ratio of A's stock after the merger?

Which of the following is not a major item of US antitrust legislation?

(I) Garn-St. Germain Act

(II) Clayton Act

(III) Hart-Scott-Rodino Act

The following mergers have been blocked on antitrust grounds except:

The acquisition of stock has the advantage of:

Firm A has a value of $200 million, and B has a value of $120 million. Merging the two would allow a cost savings with a present value of $30 million. Firm A purchases B for $130 million. How much do firm A's shareholders gain from this merger?

Firm A has a value of $200 million, and B has a value of $120 million. Merging the two would allow a cost savings with a present value of $30 million. Firm A purchases B for $130 million. What is the cost of this merger?

Firm A has a value of $100 million, and B has a value of $70 million. Merging the two would allow a cost savings with a present value of $20 million. Firm A purchases B for $75 million. How much do firm A's shareholders gain from this merger?

Firm A has a value of $100 million, and B has a value of $70 million. Merging the two would allow a cost savings with a present value of $20 million. Firm A purchases B for $75 million. What is the gain from this merger?

Firm A has a value of $200 million, and B has a value of $120 million. Merging the two would allow a cost savings with a present value of $30 million. Firm A purchases B for $130 million. What is the gain from this merger?

Firm A has a value of $100 million, and B has a value of $70 million. Merging the two would allow a cost savings with a present value of $20 million. Firm A purchases B for $75 million. What is the cost of this merger?

The following are dubious reasons for mergers:

(I) to diversify

(II) increasing the earnings per share (EPS)

(III) lower financing costs

(IV) industry consolidation

Giant Co. is considering the acquisition of Well Known Inc. Both companies produce closely related products, but Giant Co. is a considerably larger firm. Giant Co. will use cash-only financing in its attempt to capitalize on the brand value of Well Known Inc. This scenario would most likely result in a__________ merger

The __________ exaggerates the differences between focused and diversified firms

Bankruptcy occurs when:

The following are good reasons for mergers:

(I) Economies of scale

(II) Economics of vertical integration

(III) Complementary resources

(IV) Surplus funds

(V) Eliminating inefficiencies

(VI) Industry consolidation

The following are good reasons for mergers:

(I) Surplus funds

(II) Eliminating inefficiencies

(III) Complementary resources

(IV) Increasing earnings per share (EPS)

The following reasons are good motives for mergers except:

(I) Economies of scale

(II) Complementary resources

(III) Diversification

(IV) Eliminating Inefficiencies

Daimler-Benz's acquisition of Chrysler is an example of:

(I) Horizontal merger

(II) Conglomerate merger

(III) Cross-border merger

(IV) Vertical merger

AT&T's acquisition of TCI is an example of:

(I) Horizontal merger

(II) Vertical merger

(III) Conglomerate merger

(IV) Cross-border merger

The BP and Amoco merger is an example of:

(I) Cross-border merger

(II) Horizontal merger

(III) Economies of scale

Walt Disney's acquisition of ABC television network is an example of:

(I) Horizontal merger

(II) Vertical merger

(III) Conglomerate merger

(IV) Cross-border merger

Pfizer's acquisition of Pharmacia is an example of:

(I) Horizontal merger

(II) Vertical merger

(III) Conglomerate merger

The merger of J.P. Morgan and Bank One is an example of:

(I) Cross-border merger

(II) Horizontal merger

(III) Conglomerate merger

(IV) Vertical merger

Market for corporate control includes the following:

(I) Mergers

(II) Spin-offs and divestitures

(III) Leveraged buyouts (LBOs)

(IV) Privatizations

What will earnings per share be for Firm A after the merger assuming that cash is used in the acquisition?

Firm A is planning to acquire Firm B. If Firm A prefers to make a cash offer for the merger it indicates that:

Calculate the post merger P/E ratio assuming cash is used in the acquisition.

Calculate the NPV of the merger.

What will be the post-merger price per share for Firm A's stock if Firm A pays in cash?

The main difference in a tax-free versus taxable acquisition to the shareholders is that:

(I) In a tax-free acquisition shares are only exchanged, while in a taxable transaction the shares are considered sold and realized capital gains or losses are taxed

(II) In a tax-free acquisition a capital gain and loss are realized and then new shares issued, while in a taxable transaction the assets are revalued, taxed on any capital gains and losses and then shares exchanged

(III) In a tax-free acquisition the shareholders simply take the cash and depart, while in a taxable transaction the shareholders must stay with the new entity

If an acquisition is made using cash payment then the acquisition is:

The DOC Corporation with a book value of $20 million and a market value of $30 million has merged with the CIC Corporation with a book value of $6 million and a market value of $8 million at a price of $9 million. If the transaction is a purchase will there be any goodwill, and if so, what is the amount of goodwill?