Which of the following statements regarding recapitalization as a takeover defense is FALSE?
A)Another defense against a takeover is a recapitalization,in which a company changes its capital structure to make itself less attractive as a target.
B)Restructuring itself can produce efficiency gains,often removing the principal motivation for the takeover in the first place.
C)By increasing leverage on its own,the target firm can reap the benefit of the interest tax shields.
D)In many cases,a substantial portion of the synergy gains that an acquirer anticipates from a takeover are savings from a decrease in leverage as well as other cost reductions.

Question

Quizplus · Accepted Answer

The statement that "In many cases, a substantial portion of the synergy gains that an acquirer anticipates from a takeover are savings from a decrease in leverage as well as other cost reductions" is false. Synergy gains from a takeover are typically expected to come from an increase in efficiency and revenue growth, not just cost reductions related to leverage. Recapitalization may be a defensive tactic used by a target company to make itself less attractive to an acquirer, but the other statements in the answer choices are all true.

Which of the Following Statements Regarding Recapitalization as a Takeover