Exam 18: Mergers, Lbos, Divestitures, and Business Failure

Pyramiding is an arrangement among holding companies wherein one company controls others, thereby causing an even greater magnification of earnings and losses.

A(n) ________ is an arrangement whereby an insolvent firm's creditors receive full payment, although not immediately.

The creation of a high-debt, private corporation with improved cash flow and value is the goal in ________.

Subsidiary companies are corporations having no voting control on holding companies.

The combination of a dress manufacturer and a credit bureau is an example of ________.

The actual ratio of exchange in a stock-exchange acquisition is the ratio of the amount paid per share of the target company to the per-share market price of the acquiring firm.

One of the key attributes that makes a firm a good candidate for an LBO is that it has stable and predictable cash flows that are adequate to meet interest and principal payments on the debt.

A firm's current structure is as follows: *Secured by fixed assets. Suggest a recapitalized capital structure that would reduce the debt/equity ratio (several solutions are feasible). Calculate the d/e ratio for the pre-reorganization capital structure and the post-reorganization capital structure.

An involuntary petition for reorganization may be filed against a firm if ________.

An attempt to gain control of a target firm by buying sufficient shares of it in the marketplace is known as a ________ and is typically accomplished through a ________.

An attractive candidate for acquisition through a leveraged buyout should ________.

Which of the following is true of a conglomerate merger?

A creditor in possession in a Chapter 12 bankruptcy proceeding is responsible for valuing a firm both in terms of its liquidation value and as a going concern.

One of the key attributes that makes a firm a good candidate for an LBO is that it has a solid position in the industry with reasonable expectations for future growth.

In defending against hostile takeover attempts, a company will include provisions in the employment contracts of key executives that provide them with sizable compensation if the firm is taken over. This is called the ________ strategy.

The result of spin-off to the parent company is ________.

Primary motives for merging include growth or diversification, synergy, fund raising, increased managerial skill or technology, tax considerations, increased ownership liquidity, and defense against takeovers.

A merger transaction is not supported by the target firm's management, forcing the acquiring company to try to gain control of the firm by buying shares in the marketplace. This is an example of ________.

In an LBO, 90 percent or more of the purchase price is financed with debt.

A form of divestiture in which an operating unit becomes an independent company by issuing shares in it on a pro rata basis to the parent company's shareholders is called ________.