32 Questions
Which of the following is NOT a type of merger?
Reverse merger
What is the primary reason for merger waves?
Economic expansions and bull markets
Which of the following is NOT a reason for a company to acquire another?
Diversification
What is the purpose of valuation in the takeover process?
To compare the target to similar firms for a rough estimate of value
Which type of merger involves companies in different industries?
Conglomerate merger
What is the purpose of economies of slope in a merger?
To save costs by combining marketing and distribution of related products
What is the key advantage of using discounted cash flows in a merger analysis?
It includes the effects of synergies between the merging firms
After the public announcement of a merger offer, what two forms of consideration are typically offered to target shareholders?
Cash and stock swap
What is the key reason a board of directors may not approve a merger offer, even if it includes a premium for target shareholders?
The board believes the offer price is too low
Under the Revlon duties, what is the board of the target firm required to do?
Pursue the highest value for target shareholders
What is the primary purpose of a poison pill defense strategy?
To make it more difficult to replace bad managers
What is the key benefit of golden parachutes for target firm managers?
They make managers more receptive to a takeover offer
What is the primary purpose of a corporate raider acquiring a toehold stake in a target firm?
To initiate a hostile takeover attempt
What is the key benefit of competition in the takeover market for target firm shareholders?
It ensures most of the merger benefits go to the target firm
What is the primary purpose of a freezeout merger strategy?
To force non-tendering shareholders to accept the tender offer price
What is the key disadvantage of a leveraged buyout (LBO) strategy for a corporate raider?
The raider must take on significant debt to finance the acquisition
What is the primary mechanism used for a firm to gain control over another firm?
Acquisition
In a horizontal merger, the target and acquirer firms are in:
The same industry
Which of the following is NOT a potential benefit of a merger or acquisition?
Overconfidence of CEOs
In a conglomerate merger, the target and acquirer firms are in:
Different industries
What is the purpose of valuation in the takeover process?
To compare the target to similar firms for a rough estimate of value
Which type of merger involves firms that are buyer and seller in the same supply chain?
Vertical merger
What is the key benefit of competition in the takeover market for target firm shareholders?
It ensures the acquirer pays the highest possible premium for the target
What is the primary purpose of a corporate raider acquiring a toehold stake in a target firm?
To initiate a takeover attempt of the target firm
Under the Revlon duties, what is the board of the target firm required to do?
Seek the highest value for the target firm's shareholders
What is the key advantage of using discounted cash flows in a merger analysis?
It captures the synergies and strategic benefits of the merger
What is the primary purpose of a freezeout merger strategy?
To force out minority shareholders of the target firm
What is the key benefit of golden parachutes for target firm managers?
It incentivizes managers to be more receptive to a takeover
What is the primary purpose of a poison pill defense strategy?
To entrench the target firm's management more securely in their positions
What is the key reason a board of directors may not approve a merger offer, even if it includes a premium for target shareholders?
All of the above
What are the two forms of consideration typically offered to target shareholders after the public announcement of a merger offer?
Cash and stock swap
What is the key disadvantage of a leveraged buyout (LBO) strategy for a corporate raider?
It increases the target firm's debt burden and financial risk
This quiz covers the different types of mergers such as horizontal, vertical, and conglomerate mergers, as well as the concept of merger waves in the market. Learn about the distinctions between acquisition and merger, and how merger activity varies with economic cycles.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
