Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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Question
Chapter 26, Problem 3Q
Summary Introduction
To discuss: Whether merger among two firms needs tender offer.
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Firm A wants to acquire Firm B. Firm B’s management agrees that themerger is a good idea. Might a tender offer be used? Why or why not?
In case of
a firm facing an unfriendly merger, offer might arrange to be acquired by a different, friendly firm.
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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.
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Similar questions
- 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_forwardIs synergy a valid rationale for mergers?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
- Can a Joint venture be converted to merger and consolidation? how would you account for that?arrow_forward[S1] A proxy fight involves having shareholders looking for board members that will allow an acquisition. [S2] A tender offer can be made with or without plans for an acquisitiona. Only S2 is true.b. Both are true.c. Only S1 is true.d. Neither is true.arrow_forwardWhy might the portfolio effect of a merger provide a higher valuation for the participating firms?arrow_forward
- If stock market returns for merged firms are positive, which motives for horizontal merger would be supported? If stock market returns were negative, which motives would be supported? PORarrow_forwardWhich of the following statements is most CORRECT? Oa. Managers who purchase other firms often assert that the new combined firm will enjoy benefits from diversification, including more stable earnings. However, since shareholders are free to diversify their own holdings, and at what's probably a lower cost, diversification benefits is generally not a valid motive for a publicly held firm. Ob. The smaller the synergistic benefits of a particular merger, the greater the scope for striking a bargain in negotiations, and the higher the probability that the merger will be completed. Oc. Since mergers are frequently financed by debt rather than equity, a lower cost of debt or a greater debt capacity are rarely relevant considerations when considering a merger. Od. Operating economies are never a motive for mergers. Oe. Tax considerations often play a part in mergers. If one firm has excess cash, purchasing another firm exposes the purchasing firm to additional taxes. Thus, firms with excess…arrow_forwardWhat options does a company have if its board or management is opposed to an acquisition, a merger, or a takeover?arrow_forward
- Why might two companies choose to form a strategicalliance rather than pursue a merger or an acquisition?arrow_forwardWhy 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 aquisarrow_forwardDefine strategic alliance and joint venture, and explain whya company would choose these options over a merger oran acquisition.arrow_forward
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