Mergers and Acquisitions UPDATED ACTUAL Questions and CORRECT Answers
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Course
Mergers and Acquisitions
Institution
Mergers And Acquisitions
Mergers and Acquisitions UPDATED
ACTUAL Questions and CORRECT
Answers
Financial Synergy - CORRECT ANSWER- - Usually associated with Conglomerate
merger
- Company is regarded as
Diversifier portfolio
- Cashflow from unrelated diversifications are not correlated smooths cf, reduces volati...
Mergers and Acquisitions UPDATED
ACTUAL Questions and CORRECT
Answers
Financial Synergy - CORRECT ANSWER✔✔- - Usually associated with Conglomerate
merger
- Company is regarded as
Diversifier portfolio
- Cashflow from unrelated diversifications are not correlated smooths cf, reduces volatility
Financial synergy is when the combination of two firms results in greater value than if the
they were to operate separately .(2+2=5) financial synergies are most often evaluated in the
context of mergers and acquisitions
However controversies ??
Price/Equity Ratio ( needed?) - CORRECT ANSWER✔✔- ratio of stock price to earnings
per share
Leverage Buyout (LBO) - CORRECT ANSWER✔✔- an attempt by employees,
management, or a group of investors to purchase an organization primarily through
borrowing
- where debt is used to take public company private
hostile takeover - CORRECT ANSWER✔✔- the acquisition of a company over the
opposition of its management
when a bid is successfully put to a target shareholders by a potential acquirer without the
approval of the target board
anti-takeover tactics - CORRECT ANSWER✔✔- Defence (sic) also emerged at this time
Stock repurchase - is a purchase by the target of its own-issued shares from its shareholders
Fourth Wave (cont.) - CORRECT ANSWER✔✔- • Development of antitakeover strategies
and tactics
• Role of investment bankers and attorneys
• Development of laws: federal and state
• Development of the junk bond market
• High number of leveraged buyouts and going private transactions
• Relaxed antitrust enforcement
Characteristics of 4th Merger Wave - CORRECT ANSWER✔✔- - number of hostile mergers
up
- size of target larger
- industry trends- more mergers within certain industries, (oil and natural gas )
- deregulation - baking, for example, airlines
- role of raider: ??
Private Equity - CORRECT ANSWER✔✔- capital that is not listed on a public exchange
and is composed of funds and investors that directly invest in private companies, or that
engage in buyouts of public companies, resulting in the delisting of public equity
investments in companies that are not traded on a stock exchange
5th Merger wave (1994 -2001) - CORRECT ANSWER✔✔- much more activity happening
outwit the uk
merger waves in the EU and particularly on the UK
,- Roll-Ups: Market attention with consolidating deals
-Consolidations: Consolidate through larger scale
acquisitions of companies
The major industries:
1. Funeral Homes
2. Office Products
3. Floral Products
But, failed to deliver on promised gains, such as lower costs and greater synergies
Emerging Market Acquirer - CORRECT ANSWER✔✔- new type of bidder that became
important in the 5th merger
relatively new breed of acquirer from emerging markets, which have targeted companies in
the developed world for a variety of reasons.
speculative bubble - CORRECT ANSWER✔✔- an unrealistic or unfounded rise in economic
values
corporate management - CORRECT ANSWER✔✔- the set of managers whose
responsibility is to supervise and oversee the divisional managers
Recent Trends - CORRECT ANSWER✔✔- Growth of emerging markets acquireres
growth of foreign sovereign funds investments
also private equity remains popular
, Foreign sovereign funds - CORRECT ANSWER✔✔- (A sovereign wealth fund, sovereign
investment fund, or social wealth fund is a state-owned investment fund that invests in real
and financial assets such as stocks, bonds, real estate, precious metals, or in alternative
investments such as private equity fund or hedge funds.)
- Largest pools of government-controlled capital
- two of the largest ( Abu Dhabi, Citigroup)
They have made large investemnets in UBS Citigroup
Investment have thus far been minority investments - seeking control
Merger of Equals (MOE) - CORRECT ANSWER✔✔- Two companies of equal size -
usually one company ends up being the dominant one
example: Daimler merger of equals with Chrysler
Here Daimler acquired Chrysler
kderkorian sued and said not a merger of equals but an acquisition and if so he wanted his
premium - lost this suit.
Subsidairy merger - CORRECT ANSWER✔✔- A merger - merger of two companies in
which the target becomes a subsidiary
example: GM acquired EDS and made it a subsidiary and issued class e shares
Advantages:
May allow the buyer to keep the Taggert as a seprate subsidiary corporation and insulate the
parent company from the target's liabilities
Tender Offer - CORRECT ANSWER✔✔- an offer to purchase the stock of a firm targeted
for acquisition at a price just high enough to tempt stockholders to sell their shares
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