a. Sellers almost always gain in mergers.Falseb. Buyers usually gain more than sellers.c. Firms that do unusually well tend to be acquisition targets.d. Merger activity in the United States varies dramatically from year to year.e. On the average, mergers produce large economic gains.f. Tender offers require the approval of the selling firm’s management.g. The cost of a merger to the buyer equals the gain realized by the seller.
Added by Megan F.
Step 1
"Sellers almost always gain in mergers." - This statement is generally considered true because sellers often receive a premium for their shares during a merger. Show more…
Show all steps
Your feedback will help us improve your experience
Aparna Shakti and 87 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
True or false? a. Sellers almost always gain in mergers. b. Buyers almost always gain in mergers. c. Firms that do unusually well tend to be acquisition targets. d. Merger activity in the United States varies dramatically from year to year. e. On the average, mergers produce substantial economic gains. f. Tender offers require the approval of the selling firm's management. g. The cost of a merger is always independent of the economic gain produced by the merger.
For each of the following scenarios, estimate how much value an acquisition will create, how much of that value will be appropriated by each of the bidding firms, and how much of that value will be appropriated by each of the target firms. In each of these scenarios, assume that firms do not face significant capital constraints. a. A bidding firm, A, is worth $27,000 as a stand-alone entity. A target firm, B, is worth $12,000 as a stand-alone entity, but $18,000 if it is acquired and integrated with Firm A. Several other firms are interested in acquiring Firm B, and Firm B is also worth $18,000 if it is acquired by these other firms. If A acquired B, would this acquisition create value? If yes, how much? How much of this value would the equity holders of A receive? How much would the equity holders of B receive? b. The same scenario as in a, except that the value of B if it is acquired by the other firms interested in it is only $12,000. c. The same scenario as in a, except that the value of B if it is acquired by the other firms interested in it is $16,000. d. The same scenario as in b, except that Firm B contacts several other firms and explains to them how they can create the same value with Firm B that Firm A does. e. The same scenario as in b, except that Firm B sues Firm A. After suing Firm A, Firm B installs a "supermajority" rule in how its board of directors operates. After putting this new rule in place, Firm B offers to buy back any stock purchased by Firm A for 20% above the current market price.
Akash M.
The odds seem to be clearly weighted against success in acquisitions. If you were to create a strategy to grow, based upon acquisitions, which of the following offers your best chance of success? Select one: a. Large, private target, pay with stock, and cost synergies b. Small, private target, pay with cash; and cost synergies c. Small, private target, pay with stock; and cost synergies d. Small, public target; pay with cash ; and growth synergies e. Large, public target, pay with cash, and growth synergies f. Large, private target, pay with cash, and growth synergies
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD