Pregunta 1
Pregunta
Takeover is general term referring to [blank_start]transfer[blank_end] of [blank_start]control[blank_end] of firm from one [blank_start]group[blank_end] of shareholders to another. Firm that has decided to take over another firm is [blank_start]bidder[blank_end] & other firm is [blank_start]target[blank_end]
Respuesta
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transfer
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control
-
group
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bidder
-
target
Pregunta 2
Pregunta
Firm can get control of another firm without owning more than [blank_start]51%[blank_end] of [blank_start]shares[blank_end]. Firm can have [blank_start]sufficient[blank_end] amount of [blank_start]share ownership[blank_end] in another firm that enables [blank_start]bidding[blank_end] firm to take control of [blank_start]management[blank_end] of that firm
Respuesta
-
51%
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shares
-
sufficient
-
share ownership
-
bidding
-
management
Pregunta 3
Pregunta
Merger- [blank_start]Absorption[blank_end] of one firm by another. Acquiring firm retains [blank_start]name[blank_end] & [blank_start]identity[blank_end], & acquires all [blank_start]assets[blank_end] & [blank_start]liabilities[blank_end] of acquired firm. Acquired firm [blank_start]ceases[blank_end] to [blank_start]exist[blank_end] after merger
Respuesta
-
Absorption
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name
-
identity
-
assets
-
liabilities
-
ceases
-
exist
Pregunta 4
Pregunta
Consolidation- Similar to [blank_start]merger[blank_end] but [blank_start]new[blank_end] firm is created. Acquiring & acquired firm [blank_start]cease[blank_end] to [blank_start]exist[blank_end] & become part of [blank_start]new[blank_end] firm
Respuesta
-
merger
-
new
-
cease
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exist
-
new
Pregunta 5
Pregunta
One advantage of using merger to acquire firm is it’s [blank_start]legally simple[blank_end] & does not [blank_start]cost[blank_end] as much as other forms of acquisition. This is because firms [blank_start]agree[blank_end] to [blank_start]combine[blank_end] their entire [blank_start]operations[blank_end]
Respuesta
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legally simple
-
cost
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agree
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combine
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operations
Pregunta 6
Pregunta
One disadvantage of using merger to acquire firm is it must be [blank_start]approved[blank_end] by [blank_start]vote[blank_end] of [blank_start]shareholders[blank_end] of each firm
Respuesta
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approved
-
vote
-
shareholders
Pregunta 7
Pregunta
Acquisition of shares- Acquirer purchases [blank_start]target[blank_end] firm’s voting [blank_start]shares[blank_end] in exchange for [blank_start]cash[blank_end], [blank_start]equity[blank_end] or other [blank_start]securities[blank_end]. Very often this starts as [blank_start]private[blank_end] approach to buy [blank_start]shares[blank_end] but generally ends up being [blank_start]tender[blank_end] offer ([blank_start]public[blank_end] offer to buy [blank_start]shares[blank_end] of target firm)
Respuesta
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target
-
shares
-
cash
-
equity
-
securities
-
private
-
shares
-
tender
-
public
-
shares
Pregunta 8
Pregunta
Acquisition of shares very often related to [blank_start]hostile takeovers[blank_end] because easiest way for firm to acquire another firm is approach [blank_start]management[blank_end] of [blank_start]target[blank_end] firm & proceed through [blank_start]friendly[blank_end] takeover
Respuesta
-
hostile takeovers
-
management
-
target
-
friendly
Pregunta 9
Pregunta
Advantage of using acquisition of shares to acquire firm is that no [blank_start]shareholder meetings[blank_end] have to be held & no [blank_start]votes[blank_end] are required
Respuesta
-
shareholder meetings
-
votes
Pregunta 10
Pregunta
Acquisition of assets- Acquirer buys all of [blank_start]firm’s assets[blank_end]
Pregunta 11
Pregunta
One classification of acquisition is [blank_start]horizontal acquisition[blank_end]. This is acquisition of firm in [blank_start]same industry[blank_end]. [blank_start]Bidder[blank_end] & [blank_start]target[blank_end] firms compete with each other in their [blank_start]product markets[blank_end] i.e. one pharmaceutical company takes over another
Respuesta
-
horizontal acquisition
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same industry
-
Bidder
-
target
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product markets
Pregunta 12
Pregunta
Reasons for horizontal acquisition include [blank_start]market share[blank_end], [blank_start]elimination[blank_end] or [blank_start]reduction[blank_end] of [blank_start]competition[blank_end], [blank_start]economies of scales[blank_end], [blank_start]access[blank_end] to an [blank_start]under-utilised asset[blank_end] & [blank_start]technology transfer[blank_end]
Respuesta
-
market share
-
elimination
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reduction
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competition
-
economies of scales
-
access
-
under-utilised asset
-
technology transfer
Pregunta 13
Pregunta
Another classification of acquisition is [blank_start]vertical acquisition[blank_end]. This is acquisition of firm in [blank_start]same industry[blank_end] at different [blank_start]stages[blank_end] in [blank_start]production process[blank_end] i.e. oil company takes over company in refining business
Respuesta
-
vertical acquisition
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same industry
-
stages
-
production process
Pregunta 14
Pregunta
Reasons for vertical acquisition include [blank_start]safeguarding[blank_end] sources of [blank_start]supply[blank_end] or [blank_start]sales[blank_end] outlets, access to [blank_start]economies of scale[blank_end], [blank_start]economies[blank_end] of vertical integration & [blank_start]complementary resources[blank_end]
Respuesta
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safeguarding
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supply
-
sales
-
economies of scale
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economies
-
complementary resources
Pregunta 15
Pregunta
Third classification of acquisition is [blank_start]conglomerate acquisition[blank_end]. This is acquisition of firm that has [blank_start]no relation[blank_end] ([blank_start]bidder[blank_end] & [blank_start]target[blank_end] firm are in [blank_start]unrelated[blank_end] lines of business) i.e. software company takes over supermarket
Respuesta
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conglomerate acquisition
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no relation
-
bidder
-
target
-
unrelated
Pregunta 16
Pregunta
Reasons for conglomerate acquisition include spreading [blank_start]risk[blank_end] through [blank_start]diversification[blank_end] & [blank_start]managers’ self-interest[blank_end]
Respuesta
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risk
-
diversification
-
managers’ self-interest
Pregunta 17
Pregunta
Synergy- [blank_start]Positive[blank_end] incremental net [blank_start]gain[blank_end] associated with combination of [blank_start]two firms[blank_end] through [blank_start]merger[blank_end] or [blank_start]acquisition[blank_end]
Respuesta
-
Positive
-
gain
-
two firms
-
merger
-
acquisition
Pregunta 18
Pregunta
One source of synergy is [blank_start]revenue enhancement[blank_end]. This includes [blank_start]marketing[blank_end] gains ([blank_start]mergers[blank_end] & [blank_start]acquisitions[blank_end] may produce greater operating revenues than two [blank_start]separate firms[blank_end]), [blank_start]strategic[blank_end] benefits (increase management [blank_start]flexibility[blank_end] by two firms coming together) & market [blank_start]power[blank_end]
Respuesta
-
revenue enhancement
-
marketing
-
mergers
-
acquisitions
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separate firms
-
strategic
-
flexibility
-
power
Pregunta 19
Pregunta
Another source of synergy is [blank_start]cost reduction[blank_end]. This includes [blank_start]economies[blank_end] of [blank_start]scale[blank_end], [blank_start]economies[blank_end] of vertical [blank_start]integration[blank_end], [blank_start]technology[blank_end] transfer, complementary [blank_start]resources[blank_end], elimination of inefficient [blank_start]management[blank_end] & reduced [blank_start]capital[blank_end] requirements
Respuesta
-
cost reduction
-
economies
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scale
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economies
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integration
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technology
-
resources
-
management
-
capital
Pregunta 20
Pregunta
Third source of synergy is [blank_start]tax gains[blank_end]. This includes use of [blank_start]tax[blank_end] losses, use of unused [blank_start]debt capacity[blank_end], use of surplus [blank_start]funds[blank_end] & ability to write up [blank_start]value[blank_end] of depreciable [blank_start]assets[blank_end]
Respuesta
-
tax gains
-
tax
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debt capacity
-
funds
-
value
-
assets
Pregunta 21
Pregunta
In friendly takeover, [blank_start]management[blank_end] of two firms [blank_start]agree[blank_end] about takeover. Acquirer decides on [blank_start]target[blank_end] firm. Then, it selects [blank_start]tactic[blank_end] to carry out acquisition. After that, it decides on [blank_start]highest price[blank_end] it’s willing to pay. Then, it sets an initial [blank_start]bid price[blank_end] & makes contact with [blank_start]target[blank_end] firm. After that, many [blank_start]meetings[blank_end] & [blank_start]negotiations[blank_end] occur. Then, [blank_start]target[blank_end] firm’s board approves acquisition. Finally, an affirmative [blank_start]vote[blank_end] by [blank_start]target[blank_end] firm’s shareholders is needed
Respuesta
-
management
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agree
-
target
-
tactic
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highest price
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bid price
-
target
-
meetings
-
negotiations
-
target
-
vote
-
target
Pregunta 22
Pregunta
In hostile takeover, [blank_start]management[blank_end] of target firm [blank_start]resists[blank_end] takeover
Pregunta 23
Pregunta
One strategy that is followed for hostile takeover is [blank_start]toehold[blank_end]. Start to purchase target’s [blank_start]equity[blank_end] in secret followed by [blank_start]tender offer[blank_end] ([blank_start]offer[blank_end] made directly to shareholders of target firm to buy shares at [blank_start]premium[blank_end] over current [blank_start]market price[blank_end]). When [blank_start]tender offer[blank_end] ends bidder sees whether it has got enough [blank_start]shares[blank_end] to have [blank_start]control[blank_end] i.e. control over board of directors
Respuesta
-
toehold
-
equity
-
tender offer
-
offer
-
premium
-
market price
-
tender offer
-
shares
-
control
Pregunta 24
Pregunta
Another strategy that is followed for hostile takeover is [blank_start]street sweep[blank_end]. [blank_start]Bidding[blank_end] firm buys shares on [blank_start]open market[blank_end] until they have enough for [blank_start]control[blank_end]
Respuesta
-
street sweep
-
Bidding
-
open market
-
control
Pregunta 25
Pregunta
Third strategy that is followed for hostile takeover is [blank_start]proxy fight[blank_end]. This is an attempt to gain [blank_start]control[blank_end] of firm by soliciting [blank_start]sufficient[blank_end] number of shareholder [blank_start]votes[blank_end] to replace existing [blank_start]management[blank_end]
Respuesta
-
proxy fight
-
control
-
sufficient
-
votes
-
management
Pregunta 26
Pregunta
One defensive tactic against hostile takeovers (before) is [blank_start]golden parachutes[blank_end]. This involves generous [blank_start]compensation[blank_end] packages paid to firm's [blank_start]top management[blank_end] in event of [blank_start]takeover[blank_end]
Respuesta
-
golden parachutes
-
compensation
-
top management
-
takeover
Pregunta 27
Pregunta
Another defensive tactic against hostile takeovers (before) is [blank_start]poison pills[blank_end]. This is [blank_start]financial[blank_end] device designed to make [blank_start]unfriendly[blank_end] takeover attempts [blank_start]financially[blank_end] unappealing, if not impossible
Respuesta
-
poison pills
-
financial
-
unfriendly
-
financially
Pregunta 28
Pregunta
Third defensive tactic against hostile takeovers (before) is [blank_start]corporate charters[blank_end]. One device of [blank_start]corporate charters[blank_end] is to [blank_start]stagger[blank_end] election of board members. It involves only [blank_start]fraction[blank_end] of hostile management board getting [blank_start]replaced[blank_end] at a time. This is known as [blank_start]staggered board[blank_end] ([blank_start]classified board[blank_end]). Another device is [blank_start]supermajority provision[blank_end]. This is when firm makes acquisition more difficult by [blank_start]increasing percentage[blank_end] of shareholders of record who must approve merger
Respuesta
-
corporate charters
-
corporate charters
-
stagger
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fraction
-
replaced
-
staggered board
-
classified board
-
supermajority provision
-
increasing percentage
Pregunta 29
Pregunta
Two defensive tactics against hostile takeovers (after) are [blank_start]greenmail[blank_end] & [blank_start]standstill agreements[blank_end]. [blank_start]Greenmail[blank_end] involves [blank_start]payments[blank_end] made by firm to [blank_start]repurchase[blank_end] shares of its outstanding equity from an individual [blank_start]investor[blank_end] in an attempt to [blank_start]eliminate[blank_end] potential unfriendly takeover attempt. [blank_start]Standstill agreements[blank_end] is contract wherein [blank_start]bidding[blank_end] firm agrees to limit its holdings in [blank_start]target[blank_end] firm
Respuesta
-
greenmail
-
standstill agreements
-
Greenmail
-
payments
-
repurchase
-
investor
-
eliminate
-
Standstill agreements
-
bidding
-
target
Pregunta 30
Pregunta
Another two defensive tactics against hostile takeovers (after) are [blank_start]recapitalisations[blank_end] & [blank_start]repurchases[blank_end]. These occur at same time as [blank_start]standstill agreements[blank_end]. Firm buys [blank_start]certain[blank_end] amount of its own [blank_start]equity[blank_end] from individual [blank_start]investor[blank_end], usually at [blank_start]premium[blank_end]
Respuesta
-
recapitalisations
-
repurchases
-
standstill agreements
-
certain
-
equity
-
investor
-
premium
Pregunta 31
Pregunta
Another two defensive tactics against hostile takeovers (after) are [blank_start]going private[blank_end] & [blank_start]leverage buy-out[blank_end]. [blank_start]Going private[blank_end] is when [blank_start]publicly[blank_end] traded firm becomes [blank_start]private[blank_end] group, usually comprised of [blank_start]existing[blank_end] management, purchases its [blank_start]equity[blank_end] (delisted so not public/listed anymore). [blank_start]Leverage buyouts[blank_end] is going-private [blank_start]transaction[blank_end] in which [blank_start]large[blank_end] percentage of money used to acquire [blank_start]equity[blank_end] is borrowed. Normally, [blank_start]cash offer[blank_end] price is financed with [blank_start]large[blank_end] amounts of debt
Respuesta
-
going private
-
leverage buy-out
-
Going private
-
publicly
-
private
-
existing
-
equity
-
Leverage buyouts
-
transaction
-
large
-
equity
-
cash offer
-
large
Pregunta 32
Pregunta
Another defensive tactic against hostile takeovers (after) is [blank_start]asset restructurings[blank_end]. This is related to [blank_start]crown jewel[blank_end] as firm threatens to [blank_start]sell[blank_end] some of most important [blank_start]assets[blank_end] to make [blank_start]target[blank_end] firm less attractive to [blank_start]bidding[blank_end] firm
Respuesta
-
asset restructurings
-
crown jewel
-
sell
-
assets
-
target
-
bidding
Pregunta 33
Pregunta
Another two defensive tactics against hostile takeovers (after) are [blank_start]white knight[blank_end] & [blank_start]white squire[blank_end]. [blank_start]White knight[blank_end] is [blank_start]friendly[blank_end] suitor that [blank_start]target[blank_end] firm turns to as an alternative to [blank_start]hostile[blank_end] bidder. [blank_start]White squire[blank_end] is when firm arranges for [blank_start]friendly[blank_end] entity to acquire large block of [blank_start]equity[blank_end]
Respuesta
-
white knight
-
white squire
-
White knight
-
target
-
hostile
-
White squire
-
friendly
-
friendly
-
equity
Pregunta 34
Pregunta
Another defensive tactic against hostile takeovers (after) is [blank_start]crown jewel[blank_end]. It is [blank_start]defensive[blank_end] move that firm [blank_start]threatened[blank_end] with [blank_start]takeover[blank_end] is to [blank_start]sell[blank_end] or [blank_start]threatened[blank_end] to [blank_start]sell[blank_end] its major [blank_start]assets[blank_end]
Respuesta
-
crown jewel
-
defensive
-
threatened
-
takeover
-
sell
-
threatened
-
sell
-
assets
Pregunta 35
Pregunta
Final defensive tactic against hostile takeovers (after) is [blank_start]shark repellent[blank_end]. This is any [blank_start]tactic[blank_end] designed to [blank_start]discourage[blank_end] unwanted [blank_start]merger[blank_end] offers
Respuesta
-
shark repellent
-
tactic
-
discourage
-
merger
Pregunta 36
Pregunta
Benefits to managers of bidding firm of takeover are they receive [blank_start]bonuses[blank_end] when [blank_start]acquiring[blank_end] firms & their [blank_start]pay[blank_end] & [blank_start]prestige[blank_end] are often related to [blank_start]size[blank_end] of firm. Managers are disposed to look [blank_start]favourable[blank_end] on size [blank_start]increase[blank_end] acquisitions, even those with negative NPV
Respuesta
-
bonuses
-
acquiring
-
pay
-
prestige
-
size
-
favourable
-
increase
Pregunta 37
Pregunta
Managers of target firm employ [blank_start]defensive[blank_end] tactics even if takeover is [blank_start]beneficial[blank_end] to shareholders in order to [blank_start]safeguard[blank_end] their jobs. Managers that cannot avoid takeover may [blank_start]bargain[blank_end] with [blank_start]bidder[blank_end] taking good deal for themselves at expense of their [blank_start]shareholders[blank_end]
Respuesta
-
defensive
-
beneficial
-
safeguard
-
bargain
-
bidder
-
shareholders
Pregunta 38
Pregunta
Accounting treatment of mergers & acquisitions should recognise [blank_start]fair value[blank_end] of all assets & liabilities on [blank_start]acquisition[blank_end] date. [blank_start]IFRS 3 (Business Combinations)[blank_end], states that it should be presented in such way as to allow [blank_start]shareholders[blank_end] to understand [blank_start]true value[blank_end] of mergers & acquisitions
Pregunta 39
Pregunta
Two things that create value in leverage buyouts are extra [blank_start]debt[blank_end] which provides [blank_start]tax deduction[blank_end]. Leverage buyouts may simply increase [blank_start]debt[blank_end] level to its optimum. Also, there is increased [blank_start]efficiency[blank_end]. They own firm so interested to [blank_start]work harder[blank_end] & because high interest payments need to be made, they have to increase [blank_start]efficiency[blank_end]
Respuesta
-
debt
-
tax deduction
-
efficiency
-
debt
-
work harder
-
efficiency
Pregunta 40
Pregunta
Divestitures- [blank_start]Sale[blank_end] of [blank_start]assets[blank_end], [blank_start]operations[blank_end], [blank_start]divisions[blank_end] &/or [blank_start]segments[blank_end] of business to [blank_start]third party[blank_end]. Reasons for divestiture are required to meet [blank_start]monopolies[blank_end] or [blank_start]competition[blank_end] regulations, defence against [blank_start]hostile takeovers[blank_end], provides [blank_start]cash[blank_end] to poor liquidity firms, [blank_start]sell-offs[blank_end] streamline firm making it easier to value & firms may simply want to sell [blank_start]unprofitable divisions[blank_end]
Respuesta
-
Sale
-
assets
-
operations
-
divisions
-
segments
-
third party
-
monopolies
-
competition
-
hostile takeovers
-
cash
-
sell-offs
-
unprofitable divisions
Pregunta 41
Pregunta
One type of divestiture is [blank_start]spin-off[blank_end]. This is distribution of [blank_start]shares[blank_end] in subsidiary to [blank_start]existing[blank_end] parent company [blank_start]shareholders[blank_end]. Reasons for [blank_start]spin-off[blank_end] are publicly traded division increases [blank_start]transparency[blank_end] in market making it easier to [blank_start]value[blank_end] company & spin-off, equity acts as an incentive for [blank_start]managers[blank_end] to work harder, [blank_start]tax[blank_end] consequences of [blank_start]spin-off[blank_end] are generally better than from sale because parent receives no [blank_start]cash[blank_end] from the spin-off
Respuesta
-
spin-off
-
shares
-
existing
-
shareholders
-
spin-off
-
transparency
-
value
-
managers
-
tax
-
spin-off
-
cash
Pregunta 42
Pregunta
Another type of divestiture is [blank_start]carve-out[blank_end]. This is same as [blank_start]spin-offs[blank_end] but [blank_start]shares[blank_end] in this entity are sold to [blank_start]public[blank_end] via an [blank_start]IPO[blank_end]
Respuesta
-
carve-out
-
spin-offs
-
shares
-
public
-
IPO
Pregunta 43
Pregunta
Third type of divestiture is [blank_start]split-up[blank_end]. This is [blank_start]splitting[blank_end] of company into [blank_start]two[blank_end] or [blank_start]more[blank_end] companies
Respuesta
-
split-up
-
splitting
-
two
-
more