Deck 28: Mergers and Acquisitions

Question 1

The complete absorption of one company by another, wherein the acquiring firm retains its identity and the acquired firm ceases to exist as a separate entity, is called a:

A)merger.
B)consolidation.
C)tender offer.
D)spinoff.
E)divestiture.

Answer 1

merger.

Question 2

A business deal in which all publicly owned equity in a firm is replaced with complete equity ownership by a private group is called a:

A)tender offer.
B)proxy contest.
C)going-private transaction.
D)leveraged buyout.
E)consolidation.

Answer 2

going-private transaction.

Question 3

In a merger the:

A)legal status of both the acquiring firm and the target firm is terminated.
B)acquiring firm retains its name and legal status.
C)acquiring firm acquires the assets but not the liabilities of the target firm.
D)acquired firm remains as separate entity.
E)target firm continues to exist as a subsidiary of the acquiring firm.

Answer 3

acquiring firm retains its name and legal status.

Question 4

The distribution of shares in a subsidiary to existing parent company equityholders is called a(n):

A)lockup transaction.
B)bear hug.
C)equity carve-out.
D)spin-off.
E)split-up.

Question 5

If Microsoft were to acquire U.S.Airways, the acquisition would be classified as a _____ acquisition.

A)horizontal
B)longitudinal
C)conglomerate
D)vertical
E)complementary resources

Question 6

Going-private transactions in which a large percentage of the money used to buy the outstanding equity is borrowed is called a:

A)tender offer.
B)proxy contest.
C)merger.
D)leveraged buyout.
E)consolidation.

Question 7

A contract wherein the bidding firm agrees to limit its holdings in the target firm is called a:

A)supermajority amendment.
B)standstill agreement.
C)greenmail provision.
D)poison pill amendment.
E)white knight provision.

Question 8

Which of the following activities are commonly associated with takeovers? I. the acquisition of assets
II) proxy contests
III) management buyouts
IV) leveraged buyouts

A)I and III only.
B)II and IV only.
C)I, III, and IV only.
D)I, II, and IV only.
E)I, II, III, and IV.

Question 9

When a building supply store acquires a lumber mill it is making a ______ acquisition.

A)horizontal
B)longitudinal
C)conglomerate
D)vertical
E)complementary resources

Question 10

Generous compensation packages paid to a firm's top management in the event of a takeover are referred to as:

A)golden parachutes.
B)poison puts.
C)white knights.
D)shark repellents.
E)bear hugs.

Question 11

A merger in which an entirely new firm is created and both the acquired and acquiring firms cease to exist is called a:

A)divestiture.
B)consolidation.
C)tender offer.
D)spinoff.
E)conglomeration.

Question 12

A change in the corporate charter making it more difficult for the firm to be acquired by increasing the percentage of shareholders that must approve a merger offer is called a:

A)supermajority amendment.
B)standstill agreement.
C)greenmail provision.
D)poison pill amendment.
E)white knight provision.

Question 13

The acquisition of a firm in the same industry as the bidder is called a _____ acquisition.

A)conglomerate
B)forward
C)backward
D)horizontal
E)vertical

Question 14

The sale of equity in a wholly owned subsidiary via an initial public offering is referred to as a(n):

A)split-up.
B)equity carve-out.
C)countertender offer.
D)white knight transaction.
E)lockup transaction.

Question 15

An attempt to gain control of a firm by soliciting a sufficient number of equityholder votes to replace the current board of directors is called a:

A)tender offer.
B)proxy contest.
C)going-private transaction.
D)leveraged buyout.
E)consolidation.

Question 16

The payments made by a firm to repurchase shares of its outstanding equity from an individual investor in an attempt to eliminate a potential unfriendly takeover attempt are referred to as:

A)a golden parachute.
B)standstill payments.
C)greenmail.
D)a poison pill.
E)a white knight.

Question 17

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

A)receive income that is considered to be tax-exempt.
B)gift their shares to a tax-exempt organization and therefore have no taxable gain.
C)are viewed as having exchanged their shares.
D)sell their shares to a qualifying entity thereby avoiding both income and capital gains
Taxes.
E)sell their shares at cost thereby avoiding the capital gains tax.

Question 18

A friendly suitor that a target firm turns to as an alternative to a hostile bidder is called a:

A)golden suitor.
B)poison put.
C)white knight.
D)shark repellent.
E)crown jewel.

Question 19

A financial device designed to make unfriendly takeover attempts financially unappealing, if not impossible, is called:

A)a golden parachute.
B)a standstill agreement.
C)greenmail.
D)a poison pill.
E)a white knight.

Question 20

The acquisition of a firm involved with a different production process stage than the bidder is called a _____ acquisition.

A)conglomerate
B)forward
C)backward
D)horizontal
E)vertical

Question 21

When evaluating an acquisition, you should:

A)concentrate on book values and ignore market values.
B)focus on the total cash flows of the merged firm.
C)apply the rate of return that is relevant to the incremental cash flows.
D)ignore any one-time acquisition fees or transaction costs.
E)ignore any potential changes in management.

Question 22

The purchase accounting method for mergers require that:

A)the excess of the purchase price over the fair market value of the target firm be recorded
As a one-time expense on the income statement of the acquiring firm.
B)goodwill be amortized on a yearly basis.
C)the equity of the acquiring firm be reduced by the excess of the purchase price over the
Fair market value of the target firm.
D)the assets of the target firm be recorded at their fair market value on the balance sheet of
The acquiring firm.
E)the excess amount paid for the target firm be recorded as a tangible asset on the books of
The acquiring firm.

Question 23

Which one of the following statements is correct?

A)A spin-off frequently follows an equity carve-out.
B)A split-up frequently follows a spin-off.
C)An equity carve-out is a specific type of acquisition.
D)A spin-off involves an initial public offering.
E)A divestiture means that the original firm ceases to exist.

Question 24

Which one of the following combinations of firms would benefit the most through the use of complementary resources?

A)A ski resort and a travel trailer sales outlet
B)A golf resort and a ski resort
C)A hotel and a home improvement center
D)A swimming pool distributor and a kitchen designer
E)A fast food restaurant and a dry cleaner

Question 25

The value of a target firm to the acquiring firm is equal to:

A)the value of the target firm as a separate entity plus the incremental value derived from the
Acquisition.
B)the purchase cost of the target firm.
C)the value of the merged firm minus the value of the target firm as a separate entity.
D)the purchase cost plus the incremental value derived from the acquisition.
E)the incremental value derived from the acquisition.

Question 26

In a merger or acquisition, a firm should be acquired if it:

A)generates a positive net present value to the shareholders of an acquiring firm.
B)is a firm in the same line of business, in which the acquirer has expertise.
C)is a firm in a totally different line of business which will diversity the firm.
D)pays a large dividend which will provide cash pass through to the acquiror.
E)None of the above.

Question 27

The shareholders of a target firm benefit the most when:

A)an acquiring firm has the better management team and replaces the target firm's
Managers.
B)the management of the target firm is more efficient than the management of the acquiring
firm which replaces them.
C)the management of both the acquiring firm and the target firm are as equivalent as
Possible.
D)their current management team is kept in place even though the managers of the
Acquiring firm are more suited to manage the target firm's situation.
E)their management team is technologically knowledgeable yet ineffective.

Question 28

Which one of the following is most likely a good candidate for an acquisition that could benefit from the use of complementary resources?

A)A sports arena that is home only to an indoor hockey team
B)A hotel in a busy downtown business district of a major city
C)A day care center located near a major route into the main business district of a large city
D)An amusement park located in a centralized Florida location
E)A fast food restaurant located near a major transportation hub

Question 29

A reason for acquisitions is synergy.Synergy includes:

A)revenue enhancements.
B)cost reductions.
C)lower taxes.
D)lower capital requirements.
E)All of the above.

Question 30

One company wishes to acquire another.Which of the following forms of acquisition does not require a formal vote by the shareholders of the acquired firm?

A)Merger
B)Acquisition of equity
C)Acquisition of assets
D)Consolidation
E)All of the above require a formal vote.

Question 31

Suppose that Verizon and Sprint were to merge.Ignoring potential antitrust problems, this merger would be classified as a:

A)horizontal merger.
B)vertical merger.
C)conglomerate merger.
D)monopolistic merger.
E)None of the above.

Question 32

Which of the following represent potential gains from an acquisition? I. the replacement of ineffective managers
II) lower costs per unit produced
III) an increase in firm size so that diseconomies of scale are realized
IV) spreading of overhead costs

A)II and III only.
B)I and IV only.
C)I, II, and IV only.
D)I, III, and IV only.
E)I, II, III, and IV.

Question 33

If a firm wants to take over another firm but feels the attempt to do so will be viewed as unfriendly it could decide to take a _____ approach to the acquisition.

A)crown jewel
B)shark repellent
C)bear hug
D)countertender offer
E)lockup

Question 34

Suppose that General Motors has made an offer to acquire General Mills.Ignoring potential antitrust problems, this merger would be classified as a:

A)monopolistic merger.
B)horizontal merger.
C)vertical merger.
D)conglomerate merger.
E)None of the above.

Question 35

Suppose that Exxon-Mobil acquired Schlumberger, an exploration/drilling company.Ignoring potential antitrust problems, this merger would be classified as a:

A)monopolistic merger.
B)vertical merger.
C)conglomerate merger.
D)horizontal merger.
E)None of the above.

Question 36

Which one of the following statements is correct?

A)If an acquisition is made with cash then the cost of that acquisition is dependent upon the
Acquisition gains.
B)Acquisitions made by exchanging shares of equity are normally taxable transactions.
C)The management of an acquiring firm may put itself at risk of losing control of the firm if
They make acquisitions using shares of equity.
D)The equityholders of the acquiring firm will be better off when an acquisition results in
Losses if the acquisition was made with cash rather than with equity.
E)Acquisitions based on legitimate business purposes are not taxable transactions
Regardless of the means of financing used.

Question 37

Which of the following represent potential tax gains from an acquisition? I. a reduction in the level of debt
II) an increase in surplus funds
III) the use of net operating losses
IV) an increased use of leverage

A)I and IV only.
B)II and III only.
C)III and IV only.
D)I and III only.
E)II, III, and IV only.

Question 38

Firm A and Firm B join to create Firm AB.This is an example of:

A)A tender offer.
B)An acquisition of assets.
C)An acquisition of equity.
D)A consolidation.
E)Both B and C.

Question 39

If an acquisition does not create value, then the:

A)earnings per share of the acquiring firm must be the same both before and after the
Acquisition.
B)earnings per share can change but the equity price of the acquiring firm should remain
Constant.
C)price per share of the acquiring firm should increase because of the growth of the firm.
D)earnings per share will most likely increase while the price-earnings ratio remains
Constant.
E)price-earnings ratio should remain constant regardless of any changes in the earnings per
Share.

Question 40

Which of the following are reasons why a firm may want to divest itself of some of its assets? I. to raise cash
II) to get rid of unprofitable operations
III) to get rid of some assets received in an acquisition
IV) to cash in on some profitable operations

A)I and II only.
B)I, II, and III only.
C)I, III, and IV only.
D)II, III, and IV only.
E)I, II, III, and IV.

Question 41

Firm A is acquiring Firm B for £25,000 in cash.Firm A has 2,000 shares of equity outstanding at a market value of £21 a share.Firm B has 1,200 shares of equity outstanding at a market price of £17 a
Share.Neither firm has any debt.The net present value of the acquisition is £1,500.What is the price
Per share of Firm A after the acquisition?

A)£21.00
B)£21.25
C)£21.75
D)£22.00
E)£22.50

Question 42

A dissident group solicits votes in an attempt to replace existing management.This is called a:

A)tender offer.
B)shareholder derivative action.
C)proxy contest.
D)management freeze-out.
E)shareholder's revenge.

Question 43

One of the most basic reasons for a merger is:

A)revenue enhancing in the hopes that net losses may decrease.
B)increased competition.
C)employee benefits.
D)cost reductions.
E)to keep lawyers and accountants employed.

Question 44

Winslow Co.has agreed to be acquired by Ferrier for £25,000 worth of Ferrier equity.Ferrier currently has 1,500 shares of equity outstanding at a price of £21 a share.Winslow has 1,000 shares
Outstanding at a price of £22.The incremental value of the acquisition is £4,000.What is the merger
Premium per share?

A)£1
B)£2
C)£3
D)£4
E)£5

Question 45

Jennifer's Boutique has 2,100 shares outstanding at a market price per share of £26.Sally's has 3,000 shares outstanding at a market price of £41 a share.Neither firm has any debt.Sally's is
Acquiring Jennifer's for £58,000 in cash.What is the merger premium per share?

A)£1.43
B)£1.62
C)£1.81
D)£2.04
E)£2.07

Question 46

The Sligo Co.is planning on merging with the Thorton Co.Sligo will pay Thorton's equityholders the current value of their equity in shares of Sligo.Sligo currently has 2,300 shares of equity
Outstanding at a market price of £20 a share.Thorton has 1,800 shares outstanding at a price of £15
A share.How many shares of equity will be outstanding in the merged firm?

A)1,800 shares
B)2,300 shares
C)2,750 shares
D)3,650 shares
E)4,100 shares

Question 47

Which of the following is not true of an acquisition of equity or tender offers?

A)No equityholder meetings need to be held.
B)No vote is required.
C)The bidding firm deals directly with the equityholders of the target firm.
D)In most cases, 100% of the equity of the target firm is tendered.
E)All of the above are true of tender offers.

Question 48

Firm X is being acquired by Firm Y for £35,000 worth of Firm Y equity.The incremental value of the acquisition is £2,500.Firm X has 2,000 shares of equity outstanding at a price of £16 a share.Firm Y
Has 1,200 shares of equity outstanding at a price of £40 a share.What is the actual cost of the
Acquisition using company equity?

A)£34,750
B)£34,789
C)£35,000
D)£35,289
E)£35,500

Question 49

Firm Q is being acquired by Firm S for £30,000 worth of Firm S equity.The incremental value of the acquisition is £2,000.Firm Q has 1,900 shares of equity outstanding at a price of £15 a share.Firm S
Has 1,500 shares of equity outstanding at a price of £40 a share.What is the net present value of
The acquisition given that the actual cost of the acquisition using company equity is £30,167?

A)£167
B)£225
C)£333
D)£425
E)£433

Question 50

Firm A is acquiring Firm B for £40,000 in cash.Firm A has 2,500 shares of equity outstanding at a market value of £18 a share.Firm B has 1,500 shares of equity outstanding at a market price of £25
A share.Neither firm has any debt.The net present value of the acquisition is £2,500.What is the
Value of Firm A after the acquisition?

A)£40,000
B)£42,500
C)£45,000
D)£47,500
E)£50,000

Question 51

If the All-Star Fuel Filling Company, a chain of gasoline stations acquire the Mid-States Refining Company, a refiner of oil products, this would be an example of a:

A)conglomerate acquisition.
B)white knight.
C)vertical acquisition.
D)going-private transaction.
E)horizontal acquisition.

Question 52

When the management and/or a small group of investors take over a firm and the shares of the firm are delisted and no longer publicly available, this action is known as a:

A)consolidation.
B)vertical acquisition.
C)proxy contest.
D)going-private transaction.
E)None of the above.

Question 53

Rudy's and Blackstone are all-equity firms.Rudy's has 1,500 shares outstanding at a market price of £22 a share.Blackstone has 2,500 shares outstanding at a price of £38 a share.Blackstone is
Acquiring Rudy's for £36,000 in cash.The incremental value of the acquisition is £3,500.What is the
Value of Rudy's Inc.to Blackstone?

A)£30,000
B)£32,500
C)£33,000
D)£36,500
E)£39,500

Question 54

Alto and Solo are all-equity firms.Alto has 2,400 shares outstanding at a market price of £24 a share.Solo has 4,000 shares outstanding at a price of £17 a share.Solo is acquiring Alto for
£63,000 in cash.The incremental value of the acquisition is £5,500.What is the net present value of
Acquiring Alto to Solo?

A)£100
B)£400
C)£1,200
D)£2,400
E)£5,500

Question 55

Holiday & Sons is being acquired by Miller's for £20,000 worth of Miller's equity.Miller has 1,300 shares of equity outstanding at a price of £20 a share.Holiday has 1,000 shares outstanding with a
Market value of £18 a share.The incremental value of the acquisition is £2,000.What is the total
Number of shares in the new firm?

A)1,000 shares
B)1,300 shares
C)1,500 shares
D)2,000 shares
E)2,300 shares

Question 56

Rudy's and Blackstone are all-equity firms.Rudy's has 1,500 shares outstanding at a market price of £22 a share.Blackstone has 2,500 shares outstanding at a price of £38 a share.Blackstone is
Acquiring Rudy's for £36,000 in cash.What is the merger premium per share?

A)£2.00
B)£4.25
C)£6.50
D)£8.00
E)£14.00

Question 57

Turner has £4.2 million in net working capital.The firm has fixed assets with a book value of £48.6 million and a market value of £53.4 million.Martin & Sons is buying Turner for £60 million in cash.
The acquisition will be recorded using the purchase accounting method.What is the amount of
Goodwill that Martin & Sons will record on its balance sheet as a result of this acquisition?

A)£0
B)£2.4 million
C)£6.6 million
D)£7.2 million
E)£11.4 million

Question 58

Cowboy Curtiss' Cowboy Hat Company recently completed a merger.When valuing the combined firm after the merger, which of the following is an example of the type of common mistake that can
Occur?

A)The use of market values in valuing either the new firm.
B)The inclusion of cash flows that are incremental to the decision.
C)The use of Curtiss' discount rate when valuing the cash flows of the entire company.
D)The inclusion of all relevant transactions cost associated with the acquisition.
E)None of the above.

Question 59

Goodday & Sons is being acquired by Baker for £19,000 worth of Baker equity.Baker has 1,500 shares of equity outstanding at a price of £25 a share.Goodday has 1,000 shares outstanding with
A market value of £16 a share.The incremental value of the acquisition is £2,000.How many new
Shares of equity will be issued to complete this acquisition?

A)760.0 shares
B)840.0 shares
C)960.0 shares
D)1,187.5 shares
E)1,312.5 shares

Question 60

Jennifer's Boutique has 2,100 shares outstanding at a market price per share of £26.Sally's has 3,000 shares outstanding at a market price of £41 a share.Neither firm has any debt.Sally's is
Acquiring Jennifer's for £58,000 in cash.The incremental value of the acquisition is £2,500.What is
The value of Jennifer's Boutique to Sally's?

A)£26,000
B)£27,600
C)£57,100
D)£58,200
E)£60,500

Question 61

Consider the following two statements: (i) In a consolidation of firms A and B, firm A's shareholders are given shares of firm B and vice
Versa.
(ii) In a consolidation of firms A and B, both firms merge their assets.

A)(i) is correct, (ii) is incorrect.
B)(ii) is correct, (i) is incorrect.
C)Both (i) and (ii) are correct.
D)Both (i) and (ii) are incorrect.
E)A consolidation is the same as a merger.

Question 62

Defensive merger tactics are designed to thwart unwanted takeovers and mergers.Do such activities work to the advantage of equityholders all of the time? Are these types of activities ethical? Who do you think benefits most from these activities?

Question 63

Sometimes the management of a target firm fights a takeover attempt even when that attempt appears to be in the best interest of the shareholders.Why would management take this stance?

Question 64

Consider the following two statements: (i) Event studies show that returns on the buyer's equity are positive around the time of the
Announcement of sale, suggesting that sell-offs create value to the buyer.
(ii) Event studies show that acquisitions are often sold off down the road.

A)(i) is correct, (ii) is incorrect.
B)(ii) is correct, (i) is incorrect.
C)Both (i) and (ii) are correct.
D)Both (i) and (ii) are incorrect.
E)None of the above.

Question 65

The empirical evidence strongly indicates that the equityholders of the target firm realize large wealth gains as a result of a takeover bid but the equityholders in the acquiring firm gain little, if anything.Although there exists no definitive answer as to why this is the case, several possible explanations have been proposed.List and explain three of these possible explanations for the minimal returns to the acquiring firm's equityholders.

Question 66

Firm V was worth £450 and Firm A had a market value of £375.Firm V acquired Firm A for £425 because they thought the combination of the new Firm VA was worth £925.What is the synergy
From the merger of Firm V and Firm A?

A)£50
B)£100
C)£475
D)£500
E)None of the above.

Question 67

Consider the following two statements: (i) Making amendments to ensure a classified or staggered board is a classic way of deterring a
Takeover after the company is in play.
(ii) A standstill agreement occurs when the target, for a fee, agrees to accept the holdings of the
Acquirer.

A)(i) is correct, (ii) is incorrect.
B)(ii) is correct, (i) is incorrect.
C)Both (i) and (ii) are correct.
D)Both (i) and (ii) are incorrect.
E)(ii) is only correct if (i) is incorrect.

Question 68

Consider the following two statements: (i) In the presence of a u-shaped average cost curve, you are willing to pay a premium for a target if
It brings you closer to the optimal size.
(ii) In the presence of a u-shaped average cost curve, firms operating at minimum average cost are
Most likely to be acquirers.

A)(i) is correct, (ii) is incorrect.
B)(ii) is correct, (i) is incorrect.
C)Both (i) and (ii) are correct.
D)Both (i) and (ii) are incorrect.
E)(i) and (ii) only hold in a hostile takeover.

Question 69

Firm A is planning on merging with Firm B.Firm A will pay Firm B's equityholders the current value of their equity in shares of FirmA.Firm A currently has 2,300 shares of equity outstanding at a
Market price of £20 a share.Firm B has 1,800 shares outstanding at a price of £15 a share.The
After-merger earnings will be £6,500.What will the earnings per share be after the merger?

A)£1.67
B)£1.78
C)£1.83
D)£1.87
E)£1.92

Question 70

Acquiring firms should:

A)First value the target as a stand-alone firm.
B)Second value synergies.
C)Third value the merger.
D)A and B.
E)A, B, and C.

Question 71

Firm A is planning on merging with Firm B.Firm A will pay Firm B's equityholders the current value of their equity in shares of FirmA.Firm A currently has 2,300 shares of equity outstanding at a
Market price of £20 a share.Firm B has 1,800 shares outstanding at a price of £15 a share.What is
The value per share of the merged firm?

A)£19.00
B)£19.18
C)£19.44
D)£20.00
E)£20.33

Question 72

Firm A is planning on merging with Firm B.Firm A will pay Firm B's equityholders the current value of their equity in shares of FirmA.Firm A currently has 2,300 shares of equity outstanding at a
Market price of £20 a share.Firm B has 1,800 shares outstanding at a price of £15 a share.What is
The value of the merged firm?

A)£73,000
B)£75,000
C)£76,667
D)£77,778
E)£78,000

Question 73

Consider the following two statements: (i) The higher the price of the bidder's equity, the more likely it is that the bidder wants to pay with
Cash.
(ii) The acquirer's equity price generally falls upon the announcement of an equity-for-equity deal.

A)(i) is correct, (ii) is incorrect.
B)(ii) is correct, (i) is incorrect.
C)Both (i) and (ii) are correct.
D)Both (i) and (ii) are incorrect.
E)Acquirers do not hold equity.

Question 74

Consider the following two statements: (i) A leveraged recapitalization is only recommended if the acquiring firm's debt level was below the
Optimum before the recapitalization.
(ii) With a leveraged recapitalization, the equity price of the target may rise because of the
Increased tax shield from greater debt.

A)(i) is correct, (ii) is incorrect.
B)(ii) is correct, (i) is incorrect.
C)Both (i) and (ii) are correct.
D)Both (i) and (ii) are incorrect.
E)None of the above.

Question 75

Firm V was worth £450 and Firm A had a market value of £375.Firm V acquired Firm A for £425 because they thought the combination of the new Firm VA was worth £925.What is the NPV from
The merger of Firm V and Firm A?

A)£0
B)£50
C)£425
D)£450
E)None of the above.

Question 76

Consider the following two statements: (i) The main purpose of vertical acquisitions is to make technology transfer of closely related
Operating activities easier.
(ii) Acquisitions can result in tax reductions through the use of unused equity holdings.

A)(i) is correct, (ii) is incorrect.
B)(ii) is correct, (i) is incorrect.
C)Both (i) and (ii) are correct.
D)Both (i) and (ii) are incorrect.
E)(i) and (ii) only hold in a hostile takeover.

Question 77

Consider the following two statements: (i) The more predictable cash flows of acquirer and target, the easier it is to assess merger
Synergies.
(ii) Because of the merger, the synergies are equally shared between acquirer and target.

A)(i) is correct, (ii) is incorrect.
B)(ii) is correct, (i) is incorrect.
C)Both (i) and (ii) are correct.
D)Both (i) and (ii) are incorrect.
E)(ii) is only correct if acquirer and target are equally big.

Question 78

When a firm acquirers all of another firm's assets:

A)It circumvents getting approval of the selling firm's shareholders.
B)It often faces a holdout by minority shareholders.
C)Both (i) and (ii) are correct.
D)Both (i) and (ii) are incorrect.
E)Firms cannot directly purchase each others assets.

Question 79

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

Question 80

Consider the following two statements: (i) In a merger, the bidding firm can deal directly with the shareholders of a target firm via a tender
Offer.
(ii) Complete absorption of one firm by another requires a merger.

A)(i) is correct, (ii) is incorrect.
B)(ii) is correct, (i) is incorrect.
C)Both (i) and (ii) are correct.
D)Both (i) and (ii) are incorrect.
E)(i) and (ii) only hold in a hostile takeover.