Question 1

The US and the UK have the most anti-takeover laws in the world

Accepted Answer

Both the US and the UK have stringent anti-takeover laws in place to protect companies from hostile takeover attempts. These laws make it difficult for potential acquirers to gain control of a company against the wishes of its management and board of directors.

Question 2

An automatic payment made to managers if their firm gets taken over is referred to as:

Accepted Answer

A golden parachute refers to the automatic payment made to managers if their firm gets taken over. Supermajority rules refer to a provision that requires a larger percentage of shareholder votes to approve major decisions. Staggered boards refer to a board of directors where only a fraction of the members are up for election at any given time. Greenmail refers to a tactic used by corporate raiders to force a company to buy back its own shares at a premium price. A soft landing refers to a gradual economic slowdown instead of a sudden or abrupt one.

Question 3

A poison pill is any strategy that makes a target firm less attractive immediately after it is taken over.

Accepted Answer

This is the exact definition of a poison pill.

Question 4

Which of the following is NOT true regarding M & As in Asia:

Accepted Answer

There are actually many restrictions preventing foreign acquirers from taking over Asian firms, such as regulations on foreign ownership and restrictions on certain industries.

Question 5

The target firm's management team may oppose being acquired although the target firm's shareholders might like it when their firm is taken.

Accepted Answer

It is possible for the target firm's management team to oppose being acquired even if the shareholders are in favor of it. The management team might disagree with the proposed terms and conditions of the acquisition or they might prefer to maintain control of the company.

Question 6

Corporate raiders were most known for disciplinary takeovers during the:

Accepted Answer

Corporate raiders were most active during the 1980s, when there was a trend of hostile takeovers and leveraged buyouts. This was fueled by easy access to financing, as well as the deregulation of financial markets. The most notorious corporate raiders of this era included Carl Icahn, T. Boone Pickens, and Michael Milken.

Question 7

The following is true about poison pills EXCEPT:

Accepted Answer

Only a small fraction of the S&P500 firms have a poison pill.

Question 8

Hostile takeovers which represent one process in which "bad" management can be eliminated once their firms are taken over are known as "disciplinary takeovers".

Accepted Answer

Hostile takeovers are often considered as disciplinary takeovers because they provide a way for shareholders to replace underperforming or problematic management of the target company.

Question 9

"Empire building" describes a vertical merger with or acquisition of one of the firm's suppliers.

Accepted Answer

"Empire building" actually describes a horizontal merger or acquisition of a competitor in order to expand the firm's market share and power. A vertical merger or acquisition of a supplier is known as "backward integration."

Question 10

Most of the time the "target" firm will enjoy a share price decrease when its acquisition is announced to the public.

Accepted Answer

This statement is not always true. Sometimes the announcement of an acquisition can cause the share price of the target firm to increase, especially if the acquiring firm is offering a premium price for the shares. It ultimately depends on various factors such as the perceived value of the deal, market conditions, and investor sentiment.

Question 11

M & A stands for mergers and acquisitions.

Accepted Answer

M & A stands for mergers and acquisitions.

Question 12

Companies choose to use mergers and acquisitions for which of the following reasons:

Accepted Answer

Companies choose mergers and acquisitions for various reasons, including growth, synergy, and diversification. A merger or acquisition can provide a faster route for a company to expand its operations, access to new markets or products, and increased economies of scale. Additionally, the combination of two entities can create synergies that can increase efficiency and profitability. Lastly, a merger or acquisition can provide diversification by enabling a company to enter a new industry or reduce its dependency on a particular product or market. Therefore, all of these reasons are valid and commonly used by companies to justify mergers and acquisitions.

Quiz 8: Corporate Takeovers: a Governance Mechanism

The US and the UK have the most anti-takeover laws in the world

An automatic payment made to managers if their firm gets taken over is referred to as:

A poison pill is any strategy that makes a target firm less attractive immediately after it is taken over.

Which of the following is NOT true regarding M & As in Asia:

The target firm's management team may oppose being acquired although the target firm's shareholders might like it when their firm is taken.

Corporate raiders were most known for disciplinary takeovers during the:

The following is true about poison pills EXCEPT:

Hostile takeovers which represent one process in which "bad" management can be eliminated once their firms are taken over are known as "disciplinary takeovers".

"Empire building" describes a vertical merger with or acquisition of one of the firm's suppliers.

Most of the time the "target" firm will enjoy a share price decrease when its acquisition is announced to the public.

M & A stands for mergers and acquisitions.

Companies choose to use mergers and acquisitions for which of the following reasons: