Exam 26: Mergers and Acquisitions

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):

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):

In a tax-free acquisition,the shareholders of the target firm:

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:

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:

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

Which of the following are examples of cost reductions that can result from an acquisition? I.allocating fixed overhead across a wider range of products II.lowering office payroll costs by combining job functions III.benefiting from economies of scale when purchasing raw materials IV.reducing the number of management personnel required

Which one of the following best defines synergy given the following? V_A = Value of firm A V_B = Value of firm B V_AB = Value of merged firm AB

Identify the three basic legal procedures that one firm can use to acquire another and briefly discuss the advantages and disadvantages of each.

Which of the following have been suggested as reasons why the stockholders in acquiring firms may not benefit to any significant degree from an acquisition? I.the price paid for the target firm might equal the target firm's total value II.management may have priorities other than the interest of the stockholders III.the takeover market may not be competitive IV.anticipated merger gains may not be fully achieved

An auto maker recently acquired a windshield manufacturer.Which type of an acquisition was this?

Which one of the following statements is correct?

The Town Crier and The News Express are all-equity firms.The Town Crier has 11,500 shares outstanding at a market price of $26 a share.The News Express has 15,000 shares outstanding at a price of $31 a share.The News Express is acquiring The Town Crier.The incremental value of the acquisition is $4,500.What is the value of The Town Crier to The News Express?

The purchase accounting method requires that:

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?

Firms can frequently create synergy by merging and sharing complementary resources with another firm.Give two examples of situations where this would most likely occur.

Which of the following represent potential gains from an acquisition? I.increased use of debt II.lower costs per unit produced III.strategic beachhead IV.diseconomies of scale

Which of the following represent potential tax benefits that can directly result from an acquisition? I.an increase in depreciation expense II.an increase in surplus funds III.the use of net operating losses IV.an increased use of leverage

Assume the following balance sheets are stated at book value. What will be the value of the equity account on the postmerger balance sheet assuming that Meat Co.purchases Loaf,Inc.and the pooling of interests method of accounting is used.

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