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Mergers and Acquisitions

1.

AT&T's acquisition of TCI is an example of:

(I) Horizontal merger

(II) Vertical merger

(III) Conglomerate merger

(IV) Cross-border merger

Answer: B

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2.

Which of the following factors influence the choice between merger and an acquisition of stock?

(I) Shareholders are dealt with directly to bypass target management and board of directors

(II) In a tender offer, usually some minority shareholders do not tender stopping complete firm absorption

(III) Target management may be unfriendly and resist an offer. Resistance usually makes the stock price higher

Answer: D

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3.

Which of the following is not a major item of US antitrust legislation?

(I) Garn-St. Germain Act

(II) Clayton Act

(III) Hart-Scott-Rodino Act

Answer: A

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4.

An example of a shark-repellent charter amendment is:

(I) Supermajority

(II) Waiting period

(III) Poison pill

(IV) Staggered board

Answer: D

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5.

Firm A has a value of $100 million, and B has a value of $70 million. Merging the two would allow a cost savings with a present value of $20 million. Firm A purchases B for $75 million. What is the gain from this merger?

Answer: B

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Answer: A

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7.

The __________ exaggerates the differences between focused and diversified firms

Answer: C

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8.

Firm A has a value of $100 million, and B has a value of $70 million. Merging the two would allow a cost savings with a present value of $20 million. Firm A purchases B for $75 million. How much do firm A's shareholders gain from this merger?

Answer: C

NPV = 20 -5 = 15

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9.

Pfizer's acquisition of Pharmacia is an example of:

(I) Horizontal merger

(II) Vertical merger

(III) Conglomerate merger

Answer: A

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Answer: D

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