Mergers,acquisitions,and Corporate Control

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Question 1

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When a firm is taken over,its management is usually replaced.

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Question 2

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Takeovers are often described as part of a broader market for corporate control.

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Question 3

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A vertical merger is one between firms at different levels of the production process.

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Question 4

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Instead of selling part of its operations,companies sometimes spin off a business by separating it from the parent firm and distributing to its shareholders the stock in the newly independent company.

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Question 5

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Allergan's sale of its generic drug business to Teva Pharmaceutical was an example of a divestiture.

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Question 6

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Carve-outs and spin-offs both provide shares of the new firm to the divesting firm's shareholders.

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Question 7

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If a segment of a business is unrelated to the rest of the firm's activities,that segment is more likely to be spun off or carved out.

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Question 8

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Changing management is the only reason that firms make acquisitions.

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Question 9

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A merger must have the approval of at least 51% of the shareholders of each firm.

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Question 10

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The expected savings from merging two banks often come from consolidating operations and eliminating redundant costs.

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Question 11

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A conglomerate merger is defined as the merger of two or more Fortune 500 companies.

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Question 12

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It is always more efficient to integrate vertically than to outsource part of one's business.

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Question 13

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By offering to buy shares directly from a target's shareholders,the acquiring firm can bypass the target firm's management altogether.

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Question 14

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Vertical integration makes sense when two firms are highly dependent upon each other.

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Question 15

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Evidence shows that investors will generally pay a premium for diversified firms.That is a good reason for firms to merge.

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Question 16

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Synergy is equal to the value of a combined firm minus the total value of the firms prior to merger.

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Question 17

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Target firms frequently deter potential bidders by devising poison pills,which make the company unappetizing.

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Question 18

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Strictly speaking,the purchase of the stock or assets of another firm is an acquisition.

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Question 19

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A typical poison pill may give existing shareholders the right to buy the company's shares at half price as soon as a bidder acquires more than 15% of the shares.The bidder is not entitled to the discount.

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Question 20

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The Williams Act in addition to state laws sets forth the rules for tender offers.

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