Exam 27: Corporate Restructuring

In the ____ method of combining financial accounts in a merger, the acquired company's assets are recorded on the acquiring company's books at their cost (net of depreciation) when originally acquired.

The most correct method of valuing a merger candidate is ____.

A firm is technically insolvent when it is unable to meet it current obligations, and ____.

A combination in which all of the combining companies are dissolved and a new firm is formed is known as a ____.

Explain the difference between a stock purchase and an asset purchase in a merger transaction. Which is preferred and why?

One reason for a company to spin-off a division is to ____.

Under Chapter(s) ____ of the bankruptcy laws, a company continues to operate while it attempts to work out a reorganization plan.

What is a form of business combination in which a company purchases all or a controlling block of another company's common shares and the two companies become affiliated?

When the net income of the combined companies after merger exceeds the sum of the net incomes prior to the merger, ____ is said to exist.

Essex Industries is considering the acquisition of Twinsburg Company in a stock-for-stock exchange. The following financial data are available on both companies. (Assume no synergy is expected with this merger.) Calculate answers to nearest 0.001. ?? Essex Twinsburg Sales \ 500 million \ 50 million Net income \ 40 million \ 3.74 million Common shares outstanding 5 million 1 million Earnings per share \ 8.00 \ 3.74 Dividends per share \ 3.00 \ 1.00 Common stock market price \ 64 \ 24 Pricelearnings ratio 8 6.42 ? Calculate the post-merger earnings per share if the exchange ratio is 0.4 shares of Essex for each share of Twinsburg. (Assume total post-merger earnings are $43,740,000.)

Once an unfriendly takeover attempt has been initiated, the target company's management can employ various other antitakeover measures to deter a takeover, including when the takeover candidate can attempt to buy back its shares, at a premium over the shares' market price, from the company or investor who initiated the unfriendly takeover attempt. The amount of this premium is called ____.

After a merger with Velo Blind, Sunlite's earnings per share are $1.50. If Sunlite had a P/E ratio of 14 times before the merger and a price of $28 a share after the merger, what is Sunlite's post-merger P/E?

In a(n) ____ common stock in a division or subsidiary is distributed to shareholders of the parent company on a pro rata basis.

Bankruptcy occurs when the firm ____.

A combination of two or more companies that have a buyer-seller relationship with each other is known as a ____.

An alternative to a spin-off is a(n) ____, which allows a large company to capture the value of a high-growth business buried within the organization.

A plan of reorganization must be all of the following EXCEPT ____.

____ equals the proceeds that would be received from the sale of the firm's assets minus its liabilities.

An antitakeover measure that is employed after the takeover has been initiated is ____.

Buggy Whip Industries is being liquidated under Chapter 7 of the bankruptcy code. When it filed for bankruptcy, its balance sheet was as follows: ? Current assets \ 22,000,000 Accounts payable \ 18,000,000 Fixed assets Acctued taxes 3,000,000 Land and buildings 9,000,000 Notes payable (bank)* 3,000,000 Equipment 11,500,000 Total current liabilities \ 24,000,000 Total assets \ 42,500,000 Mortgage bonds* 8,000,000 Debentures 4,000,000 Stockholders' equity 6,500,000 Total liabilities and equity \4 2,500,000 *Bank loan is unsecured **Mortgage bonds are secured by land and buildings Assume that the liquidation is a voluntary petition, that no unpaid contributions to employee benefit plans exist, and that no customer layaway deposits are involved. The proceeds from the liquidation of the company's assets are as follows: Current assets \ 12,000,000 Land and buildings 5,000,000 Equipment 7,500,000 Total \2 4,500,000 ? Bankruptcy administration charges are $2,500,000. Determine the amount that the mortgage bondholders will receive in this liquidation.