Question 1

Firm A wants to merge with ﬁrm B and as an acquiring ﬁrm is willing to pay a premium.Firm A's equity is currently worth EUR100 million, ﬁrm B's equity is worth EUR20 million.Firm B has 1,000,000 shares outstanding.Synergy gains are estimated to be around 10%.What is the maximum should Firm A offer to pay ﬁrm B's shares?

Accepted Answer

The combined ﬁrm will be worth 10% more ...

Question 2

A business deal in which all publicly owned equity in a ﬁrm is replaced with complete equity ownership by a private group is called a:

Accepted Answer

A)  tender offer.
B)  proxy contest.
C)  going-private transaction.
D)  leveraged buyout.
E)  consolidation.F) C) and D)
G) A) and E)

Question 3

Rudy's and Blackstone 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?

Accepted Answer

A)  £30,000
B)  £32,500
C)  £33,000
D)  £36,500
E)  £39,500F) D) and E)
G) A) and B)

Question 4

As a shareholder of a ﬁrm that is trying to acquire another ﬁrm, you are convinced that the acquisition will reduce competition.If so, would you be willing to pay a premium for the target's shares?

Accepted Answer

The answer is: perhaps.Of course, if you...

Question 5

Which of the following is not true of an acquisition of equity or tender offers?

Accepted Answer

A)  No equityholder meetings need to be held.
B)  No vote is required.
C)  The bidding ﬁrm deals directly with the equityholders of the target ﬁrm.
D)  In most cases, 100% of the equity of the target ﬁrm is tendered.
E)  All of the above are true of tender offers.F) D) and E)
G) A) and E)

Question 6

Consider the following two statements: (i)  Making amendments to ensure a classiﬁed or staggered board is a classic way of deterring a
Takeover after the company is in play.
(ii)  A standstill agreement occurs when the target, for a fee, agrees to accept the holdings of the
Acquirer.

Accepted Answer

A)  (i)  is correct, (ii)  is incorrect.
B)  (ii)  is correct, (i)  is incorrect.
C)  Both (i)  and (ii)  are correct.
D)  Both (i)  and (ii)  are incorrect.
E)  (ii)  is only correct if (i)  is incorrect.F) C) and D)
G) A) and E)

Question 7

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:

Accepted Answer

A)  merger.
B)  consolidation.
C)  tender offer.
D)  spinoff.
E)  divestiture.F) B) and E)
G) A) and D)

Question 8

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

Accepted Answer

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.F) A) and E)
G) A) and D)

Question 9

When a ﬁrm acquirers all of another ﬁrm's assets:

Accepted Answer

A)  It circumvents getting approval of the selling ﬁrm's shareholders.
B)  It often faces a holdout by minority shareholders.
C)  Both (i)  and (ii)  are correct.
D)  Both (i)  and (ii)  are incorrect.
E)  Firms cannot directly purchase each others assets.F) B) and D)
G) C) and D)

Question 10

The payments made by a ﬁrm to repurchase shares of its outstanding equity from an individual investor in an attempt to eliminate a potential unfriendly takeover attempt are referred to as:

Accepted Answer

A)  a golden parachute.
B)  standstill payments.
C)  greenmail.
D)  a poison pill.
E)  a white knight.F) A) and B)
G) All of the above

Question 11

Rudy's and Blackstone 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?

Accepted Answer

A)  £2.00
B)  £4.25
C)  £6.50
D)  £8.00
E)  £14.00F) A) and B)
G) A) and C)

Question 12

One of the most basic reasons for a merger is:

Accepted Answer

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.F) A) and B)
G) A) and E)

Question 13

Goodday & Sons is being acquired by Baker for £19,000 worth of Baker equity.Baker has 1,500 shares of equity 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 equity will be issued to complete this acquisition?

Accepted Answer

A)  760.0 shares
B)  840.0 shares
C)  960.0 shares
D)  1,187.5 shares
E)  1,312.5 sharesF) C) and D)
G) None of the above

Question 14

Suppose that Exxon-Mobil acquired Schlumberger, an exploration/drilling company.Ignoring potential antitrust problems, this merger would be classiﬁed as a:

Accepted Answer

A)  monopolistic merger.
B)  vertical merger.
C)  conglomerate merger.
D)  horizontal merger.
E)  None of the above.F) A) and B)
G) A) and C)

Question 15

Firm A and Firm B join to create Firm AB.This is an example of:

Accepted Answer

A)  A tender offer.
B)  An acquisition of assets.
C)  An acquisition of equity.
D)  A consolidation.
E)  Both B and C.F) A) and E)
G) B) and D)

Question 16

Firm A is planning on merging with Firm B.Firm A will pay Firm B's equityholders the current value of their equity in shares of FirmA.Firm A currently has 2,300 shares of equity 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?

Accepted Answer

A)  £19.00
B)  £19.18
C)  £19.44
D)  £20.00
E)  £20.33F) A) and B)
G) A) and D)

Question 17

The sale of equity in a wholly owned subsidiary via an initial public offering is referred to as a(n) :

Accepted Answer

A)  split-up.
B)  equity carve-out.
C)  countertender offer.
D)  white knight transaction.
E)  lockup transaction.F) None of the above
G) A) and B)

Question 18

In a merger the:

Accepted Answer

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)  acquired ﬁrm remains as separate entity.
E)  target ﬁrm continues to exist as a subsidiary of the acquiring ﬁrm.F) A) and B)
G) A) and D)

Question 19

When evaluating an acquisition, you should:

Accepted Answer

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.F) A) and D)
G) B) and C)

Question 20

An attempt to gain control of a ﬁrm by soliciting a suﬃcient number of equityholder votes to replace the current board of directors is called a:

Accepted Answer

A)  tender offer.
B)  proxy contest.
C)  going-private transaction.
D)  leveraged buyout.
E)  consolidation.F) C) and E)
G) None of the above

Exam 28: Mergers and Acquisitions

Firm A and Firm B join to create Firm AB.This is an example of:

Correct Answer
verified

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:

Correct Answer
verified

Which of the following is not true of an acquisition of equity or tender offers?

Correct Answer
verified

An attempt to gain control of a ﬁrm by soliciting a suﬃcient number of equityholder votes to replace the current board of directors is called a:

Correct Answer
verified

Rudy's and Blackstone 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?

Correct Answer
verified

Correct Answer
verified

A business deal in which all publicly owned equity in a ﬁrm is replaced with complete equity ownership by a private group is called a:

Correct Answer
verified

Correct Answer
verified

In a merger the:

Correct Answer
verified

Suppose that Exxon-Mobil acquired Schlumberger, an exploration/drilling company.Ignoring potential antitrust problems, this merger would be classiﬁed as a:

Correct Answer
verified

Correct Answer
verified

Consider the following two statements: (i) Making amendments to ensure a classiﬁed or staggered board is a classic way of deterring a Takeover after the company is in play. (ii) A standstill agreement occurs when the target, for a fee, agrees to accept the holdings of the Acquirer.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
The combined ﬁrm will be worth 10% more ...
View Answer

One of the most basic reasons for a merger is:

Correct Answer
verified

When evaluating an acquisition, you should:

Correct Answer
verified

The payments made by a ﬁrm to repurchase shares of its outstanding equity from an individual investor in an attempt to eliminate a potential unfriendly takeover attempt are referred to as:

Correct Answer
verified

When a ﬁrm acquirers all of another ﬁrm's assets:

Correct Answer
verified

As a shareholder of a ﬁrm that is trying to acquire another ﬁrm, you are convinced that the acquisition will reduce competition.If so, would you be willing to pay a premium for the target's shares?

Correct Answer
verified
The answer is: perhaps.Of course, if you...
View Answer

The sale of equity in a wholly owned subsidiary via an initial public offering is referred to as a(n) :

Correct Answer
verified

Exam 28: Mergers and Acquisitions

Firm A and Firm B join to create Firm AB.This is an example of:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Which of the following is not true of an acquisition of equity or tender offers?

Correct AnswerverifiedShow Answer

An attempt to gain control of a ﬁrm by soliciting a suﬃcient number of equityholder votes to replace the current board of directors is called a:

Correct AnswerverifiedShow Answer

Rudy's and Blackstone 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?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A business deal in which all publicly owned equity in a ﬁrm is replaced with complete equity ownership by a private group is called a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a merger the:

Correct AnswerverifiedShow Answer

Suppose that Exxon-Mobil acquired Schlumberger, an exploration/drilling company.Ignoring potential antitrust problems, this merger would be classiﬁed as a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Consider the following two statements: (i) Making amendments to ensure a classiﬁed or staggered board is a classic way of deterring a Takeover after the company is in play. (ii) A standstill agreement occurs when the target, for a fee, agrees to accept the holdings of the Acquirer.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe combined ﬁrm will be worth 10% more ...View AnswerShow Answer

One of the most basic reasons for a merger is:

Correct AnswerverifiedShow Answer

When evaluating an acquisition, you should:

Correct AnswerverifiedShow Answer

The payments made by a ﬁrm to repurchase shares of its outstanding equity from an individual investor in an attempt to eliminate a potential unfriendly takeover attempt are referred to as:

Correct AnswerverifiedShow Answer

When a ﬁrm acquirers all of another ﬁrm's assets:

Correct AnswerverifiedShow Answer

As a shareholder of a ﬁrm that is trying to acquire another ﬁrm, you are convinced that the acquisition will reduce competition.If so, would you be willing to pay a premium for the target's shares?

Correct AnswerverifiedThe answer is: perhaps.Of course, if you...View AnswerShow Answer

The sale of equity in a wholly owned subsidiary via an initial public offering is referred to as a(n) :

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The combined ﬁrm will be worth 10% more ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The answer is: perhaps.Of course, if you...
View Answer

Correct Answer
verified