Types of Mergers and Merger Waves Quiz
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Questions and Answers

Which of the following is NOT a type of merger?

  • Conglomerate merger
  • Horizontal merger
  • Reverse merger (correct)
  • Vertical merger
  • What is the primary reason for merger waves?

  • Overconfident CEOs
  • Pursuit of monopoly gains
  • Economic expansions and bull markets (correct)
  • Desire for vertical integration
  • Which of the following is NOT a reason for a company to acquire another?

  • Synergies
  • Stock swap
  • Diversification (correct)
  • Overconfidence
  • What is the purpose of valuation in the takeover process?

    <p>To compare the target to similar firms for a rough estimate of value</p> Signup and view all the answers

    Which type of merger involves companies in different industries?

    <p>Conglomerate merger</p> Signup and view all the answers

    What is the purpose of economies of slope in a merger?

    <p>To save costs by combining marketing and distribution of related products</p> Signup and view all the answers

    What is the key advantage of using discounted cash flows in a merger analysis?

    <p>It includes the effects of synergies between the merging firms</p> Signup and view all the answers

    After the public announcement of a merger offer, what two forms of consideration are typically offered to target shareholders?

    <p>Cash and stock swap</p> Signup and view all the answers

    What is the key reason a board of directors may not approve a merger offer, even if it includes a premium for target shareholders?

    <p>The board believes the offer price is too low</p> Signup and view all the answers

    Under the Revlon duties, what is the board of the target firm required to do?

    <p>Pursue the highest value for target shareholders</p> Signup and view all the answers

    What is the primary purpose of a poison pill defense strategy?

    <p>To make it more difficult to replace bad managers</p> Signup and view all the answers

    What is the key benefit of golden parachutes for target firm managers?

    <p>They make managers more receptive to a takeover offer</p> Signup and view all the answers

    What is the primary purpose of a corporate raider acquiring a toehold stake in a target firm?

    <p>To initiate a hostile takeover attempt</p> Signup and view all the answers

    What is the key benefit of competition in the takeover market for target firm shareholders?

    <p>It ensures most of the merger benefits go to the target firm</p> Signup and view all the answers

    What is the primary purpose of a freezeout merger strategy?

    <p>To force non-tendering shareholders to accept the tender offer price</p> Signup and view all the answers

    What is the key disadvantage of a leveraged buyout (LBO) strategy for a corporate raider?

    <p>The raider must take on significant debt to finance the acquisition</p> Signup and view all the answers

    What is the primary mechanism used for a firm to gain control over another firm?

    <p>Acquisition</p> Signup and view all the answers

    In a horizontal merger, the target and acquirer firms are in:

    <p>The same industry</p> Signup and view all the answers

    Which of the following is NOT a potential benefit of a merger or acquisition?

    <p>Overconfidence of CEOs</p> Signup and view all the answers

    In a conglomerate merger, the target and acquirer firms are in:

    <p>Different industries</p> Signup and view all the answers

    What is the purpose of valuation in the takeover process?

    <p>To compare the target to similar firms for a rough estimate of value</p> Signup and view all the answers

    Which type of merger involves firms that are buyer and seller in the same supply chain?

    <p>Vertical merger</p> Signup and view all the answers

    What is the key benefit of competition in the takeover market for target firm shareholders?

    <p>It ensures the acquirer pays the highest possible premium for the target</p> Signup and view all the answers

    What is the primary purpose of a corporate raider acquiring a toehold stake in a target firm?

    <p>To initiate a takeover attempt of the target firm</p> Signup and view all the answers

    Under the Revlon duties, what is the board of the target firm required to do?

    <p>Seek the highest value for the target firm's shareholders</p> Signup and view all the answers

    What is the key advantage of using discounted cash flows in a merger analysis?

    <p>It captures the synergies and strategic benefits of the merger</p> Signup and view all the answers

    What is the primary purpose of a freezeout merger strategy?

    <p>To force out minority shareholders of the target firm</p> Signup and view all the answers

    What is the key benefit of golden parachutes for target firm managers?

    <p>It incentivizes managers to be more receptive to a takeover</p> Signup and view all the answers

    What is the primary purpose of a poison pill defense strategy?

    <p>To entrench the target firm's management more securely in their positions</p> Signup and view all the answers

    What is the key reason a board of directors may not approve a merger offer, even if it includes a premium for target shareholders?

    <p>All of the above</p> Signup and view all the answers

    What are the two forms of consideration typically offered to target shareholders after the public announcement of a merger offer?

    <p>Cash and stock swap</p> Signup and view all the answers

    What is the key disadvantage of a leveraged buyout (LBO) strategy for a corporate raider?

    <p>It increases the target firm's debt burden and financial risk</p> Signup and view all the answers

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