Financial Management: Theory & Practice
15th Edition
ISBN: 9781337248006
Author: Eugene F. Brigham; Michael C. Ehrhardt
Publisher: Cengage Learning US
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Chapter 22, Problem 3Q
Summary Introduction
To determine:
Merger between two firms require 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.
A Moving to another question will save this response.
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?
Chapter 22 Solutions
Financial Management: Theory & Practice
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Similar questions
- 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
- what are elements of a unsuccessful merger deal and why?arrow_forwardIf 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_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_forward
- Why might two companies choose to form a strategicalliance rather than pursue a merger or an acquisition?arrow_forwardLook at a recent example of a merger announcement, and log on to the website of the acquiring company. What reasons does the acquirer give for buying the target? How does it intend to pay for the target—with cash, shares, or a mixture of the two? Can you work out how much the target’s shareholders will gain from the offer? Is it more or less than would be the case for an average merger? Now log on to finance.yahoo.com and find out what happened to the stock price of the acquiring company when the merger was announced. Were shareholders pleased with the announcement?arrow_forwardWhat is a typical merger premium paid in a merger or acquisition? What effect does this premium have on the market value of the merger candidate, and when is most of this movement likely to take place?arrow_forward
- Define strategic alliance and joint venture, and explain whya company would choose these options over a merger oran acquisition.arrow_forwardWhich of the following are common takeover tactics? a. Bear hugs b. Open market purchases c. Tender offers d. Litigation e. All of the abovearrow_forwardWhich of the following statements is most CORRECT? Oa. The primary rationale for most operating mergers is synergy. Ob. In most mergers, the benefits of synergy and the premium the acquirer pays over the market price are summed and then divided equally between the shareholders of the acquiring and target firms. Oc. Financial theory says that the choice of how to pay for a merger is really irrelevant because, although it may affect the firm's capital structure, it will not affect its overall required rate of return. Od. The basic rationale for any financial merger is synergy and, thus, the estimation of pro forma cash flows is the single most important part of the analysis. Oe. The acquiring firm's required rate of return in most horizontal mergers will not be affected, because the 2 firms will have similar betas.arrow_forward
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