KN Markets has decided to acquire a controlling interest in BJ's by purchasing shares of BJ stock in the public markets. Which one of these statements correctly applies to this acquisition?
A) This method of acquisition guarantees a quick and efficient merger.
B) KN Markets is limited by law to obtaining a maximum of 49 percent of the shares prior to obtaining the approval of BJ management.
C) The purchase of publicly traded shares may be more expensive than an outright merger.
D) Once KN Markets obtains 80 percent of BJ's shares, the remaining BJ shareholders will be required to sell their shares to KN.
E) KN Markets must obtain the approval of BJ's board of directors before purchasing shares.

Question

Quizplus · Accepted Answer

Purchasing shares in the public market can often lead to paying a premium over the share's current market value, especially if the acquisition attempt becomes widely known, driving up the share price due to increased demand. This can make the acquisition more expensive compared to negotiated mergers or acquisitions where terms can be more directly controlled.

KN Markets Has Decided to Acquire a Controlling Interest in BJ's