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Commerce and BusinessbackBusinessbackCorporate Finance/Financial ManagementbackFundamentals of Corporate FinancebackPractice Set 2491back

Mergers And Acquisitions

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Question 1
Free
Multiple Choice

Last month,Keyser Design acquired all of the assets and liabilities of Tenor Machine Works.The combined firm is known as Keyser Design.Tenor Machine Works no longer exists as a separate entity.This acquisition is best described as a:

Choose correct answer/s
A

merger.

B

consolidation.

C

tender offer.

D

spinoff.

E

divestiture.

Check answer
Question 2
Free
Multiple Choice

The Cat Box acquired The Dog House.As part of this transaction,both firms ceased to exist in their prior form and combined to create an all-new entity,Animal World.Which one of the following terms best describes this transaction?

Choose correct answer/s
A

divestiture

B

consolidation

C

tender offer

D

spinoff

E

conglomeration

Check answer
Question 3
Free
Multiple Choice

The Daily News published an ad today wherein it announced its desire to purchase shares of a competing newspaper,the Oil Town Gossip.Which one of the following terms is best described by this announcement?

Choose correct answer/s
A

merger request

B

consolidation

C

tender offer

D

spinoff

E

divestiture

Check answer
Question 4
Free
Multiple Choice

Some Freight Line Express shareholders are very dissatisfied with the performance of the firm's current management team.These shareholders want to gain control of the board of directors so they can have the power to oust current management.As a means of gaining control,these shareholders have select candidates for all of the open positions on the firm's board of directors.Since they have insufficient votes to guarantee the election of these individuals,they are contacting other shareholders and asking them to vote with them on this important matter.Of course,the current management team is encouraging shareholders to vote for their candidates for the board.Which one of the following terms is best illustrated by this situation?

Choose correct answer/s
A

tender offer

B

proxy contest

C

going-private transaction

D

leveraged buyout

E

consolidation

Check answer
Question 5
Free
Multiple Choice

A group of individual investors is in the process of acquiring all of the publicly-traded shares of OM Outfitters.Once the shares are acquired,they will no longer be publicly traded.Which of the following terms applies to this process?

Choose correct answer/s
A

tender offer

B

proxy contest

C

going-private transaction

D

leveraged buyout

E

consolidation

Check answer
Question 6
Multiple Choice

The current president and vice-presidents of Mountain Top Consulting have decided to form a private investment group with the sole purpose of purchasing Mountain Top Consulting.These individuals have found a lender who will lend them 85 percent of the purchase cost if they pledge their personal assets as collateral for the loan.The current officers agree to this arrangement,borrow the funds,and purchase Mountain Top Consulting.The purchase of this firm is referred to as a:

Choose correct answer/s
A
conglomeration.
B
proxy contest.
C
merger.
D
leveraged buyout.
E
consolidation.
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Question 7
Multiple Choice

Johnson Manufacturers and Peabody Enterprises are both manufacturers of plastic products,such as plastic plates and silverware.These two firms have decided to work together to find a more efficient way to recycle rejected products so that any rejected material can be reused.Thus,each company is going to assign two of its engineers to this project and have agreed to share any and all costs incurred in this process.This project is an example of a:

Choose correct answer/s
A
consolidation.
B
merged alliance.
C
joint venture.
D
takeover project.
E
strategic alliance.
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Question 8
Multiple Choice

Diet Soda and High Caffeine are two firms that compete in the soft drink market.These two competitors have decided to invest $10 million to form a new company,Fruit Tea,which will manufacture flavored teas.This new firm is defined as a:

Choose correct answer/s
A
consolidation.
B
strategic alliance.
C
joint venture.
D
merged alliance.
E
takeover project.
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Question 9
Multiple Choice

Alliance Chemicals recently acquired Swenson Industries in a transaction that produced a NPV of $1.3 million.This NPV is referred to as:

Choose correct answer/s
A
the agency effect.
B
the consolidating value.
C
diversification.
D
the consolidation effect.
E
synergy.
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Question 10
Multiple Choice

Roger is a major shareholder in RB Industrial Supply.Currently,Roger is quite unhappy with the direction the firm is headed and is rumored to be considering an attempt to take over the firm by soliciting the votes of other shareholders.To head off this potential attempt,the board of RB Industrial Supply has decided to offer Roger $35 a share for all the shares he owns in the firm.The current market value per share is $32.This offer to purchase Roger's shares is commonly referred to as:

Choose correct answer/s
A
a golden parachute.
B
standstill payments.
C
greenmail.
D
a poison pill.
E
a white knight.
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Question 11
Multiple Choice

Which one of the following generally has a flip-in provision that significantly increases the cost to a shareholder who is attempting to gain control over a firm?

Choose correct answer/s
A
golden parachute
B
standstill agreement
C
greenmail
D
poison pill
E
white knight
To unlock the question
Question 12
Multiple Choice

Melvin was attempting to gain control of Western Wood Products until he realized that the existing shareholders in the firm had the right to purchase additional shares at a below-market price given his hostile takeover attempt.Thus,Melvin decided to forego investing in this firm.What term applies to the tactic used by Western Wood Products to stave off this takeover attempt?

Choose correct answer/s
A
pac-man defense
B
shark repellent plan
C
golden parachute provision
D
greenmail provision
E
share rights plan
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Question 13
Multiple Choice

Nieger Mills engages in farming,trucking of farm products,and the milling and retailing of farm grains.The firm has decided to sell its farming operations to Jasper Farms.This sale is referred to as a(n):

Choose correct answer/s
A
liquidation.
B
divestiture.
C
merger.
D
allocation.
E
restructuring.
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Question 14
Multiple Choice

Princeton Enterprises is a diversified company.In addition to its primary business operations,the firm is also the sole shareholder of a wholly owned subsidiary.As part of its restructuring plan,Princeton has decided to implement an IPO offering for shares in the subsidiary.This offering is equivalent to a 25 percent ownership stake in the subsidiary.What is the distribution of these shares called?

Choose correct answer/s
A
split-up
B
equity carve-out
C
countertender offer
D
white knight transaction
E
lockup transaction
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Question 15
Multiple Choice

Family Travel Plans is the sole shareholder in its subsidiary,Traveler's Insurance Co.Family Travel Plans has decided to divest itself of its insurance operations and does so by distributing the shares in the subsidiary to the shareholders of Family Travel Plans.This distribution of shares is called a(n):

Choose correct answer/s
A
lockup transaction.
B
bear hug.
C
equity carve-out.
D
spin-off.
E
split-up.
To unlock the question
Question 16
Multiple Choice

Blasco Distributors has become a large conglomerate.Its board of directors recently concluded that the firm has become so large that it has lost its efficiency.The board further concluded that the firm could be both more efficient and more profitable if it were divided into three distinct and separate firms.The board presented this suggested to the firm's shareholders and those shareholders voted and agreed to divide the firm.Dividing this firm into separate entities is referred to as a(n):

Choose correct answer/s
A
lockup transaction.
B
divestiture.
C
equity carve-out.
D
spin-off.
E
split-up.
To unlock the question
Question 17
Multiple Choice

Which one of the following statements correctly applies to a legally defined merger?

Choose correct answer/s
A
The acquiring firm retains its identity and absorbs only the assets of the acquired firm.
B
The acquired firm is completely absorbed and ceases to exist as a separate legal entity.
C
A new firm is created which includes all the assets and liabilities of the acquiring firm plus the assets only of the acquired firm.
D
A new firm is created from the assets and liabilities of both the acquiring and acquired firms.
E
A merger reclassifies the acquired firm into a new entity which becomes a subsidiary of the acquiring firm.
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Question 18
Multiple Choice

Which of the following statements correctly apply to a merger?
I)The titles to individual assets of the acquired firm must be transferred into the acquiring firm's name.
II)The merged firm will retain the use of the acquiring company's name.
III)The acquiring firm does not have to seek approval for the merger from its shareholders.
IV)The shareholders of the acquired company must approve the merger.

Choose correct answer/s
A
I and III only
B
II and IV only
C
I, II, and III only
D
I, II, and IV only
E
I, II, III, and IV
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Question 19
Multiple Choice

In a merger the:

Choose correct answer/s
A
legal status of both the acquiring firm and the target firm is terminated.
B
acquiring firm retains its pre-merger legal status.
C
acquiring firm acquires the assets, but not the liabilities, of the target firm.
D
shareholders of the target firm have little, if any, say as to whether or not the merger occurs.
E
target firm continues to exist but will be a wholly owned subsidiary of the acquiring firm.
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Question 20
Multiple Choice

Which of the following increase the costs associated with a merger?

Choose correct answer/s
A
changing the title to all the combined firm's assets
B
disbanding the operations of the target firm
C
hiring an underwriter to distribute the IPO shares
D
issue costs associated with warrants that must be offered to the shareholders of the acquiring firm
E
seeking approval of the shareholders of both the acquiring and the acquired firm
To unlock the question