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Principles Regarding Mergers and Acquisitions

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The synergistic effect of a merger involves:
a. The sudden increase in share price of the target during a tender offer.
b. The organizational compatibility of the two firms involved in merger negotiations.
c. The psychological impact of a merger on the investment community.
d. None of the above.

M&A's can be financed by various means, including all of the following Except:
a. Venture capital
b. ESOP's
c. Warrants
d. 401k's

Which of the following is NOT a major change force that contributed to the high level of merger activity in the 1990s?
a. Unusually low valuation relationships and equity returns.
b. Globalization of markets.
c. Increase in the pace of technological change.
d. Reduction in costs of transportation and communication.

Which major merger movement was characterized by conglomerate mergers?
a. 1st merger movement.
b. 3rd merger movement.
c. Both a. and b.
d. None of the above.

Which of the flowing is NOT an example of economies of scale?
a. Cutting overhead costs
b. Combining R&D operations
c. Broadening product lines
d. Increasing sales force

Which of the following is NOT a major challenge to merger success?
a. Cultural factors
b. Implementation
c. Due diligence
d. Overcapacity

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Solution Preview

The synergistic effect of a merger involves the sudden increase in share price of the target during a tender offer: The market participants value a firm according to its future earning potential. We see the stock price of a target rise when it is the target of a tender offer because of the synergy it offers the acquirer.

M&A's can be financed by various means, ...

Solution Summary

The synergistic effect of a merger involves:
a. The sudden increase in share price of the target during a tender offer.
b. The organizational compatibility of the two firms involved in merger negotiations.
c. The psychological impact of a merger on the investment community.
d. None of the above.

M&A's can be financed by various means, including all of the following Except:
a. Venture capital
b. ESOP's
c. Warrants
d. 401k's

Which of the following is NOT a major change force that contributed to the high level of merger activity in the 1990s?
a. Unusually low valuation relationships and equity returns.
b. Globalization of markets.
c. Increase in the pace of technological change.
d. Reduction in costs of transportation and communication.

Which major merger movement was characterized by conglomerate mergers?
a. 1st merger movement.
b. 3rd merger movement.
c. Both a. and b.
d. None of the above.

Which of the flowing is NOT an example of economies of scale?
a. Cutting overhead costs
b. Combining R&D operations
c. Broadening product lines
d. Increasing sales force

Which of the following is NOT a major challenge to merger success?
a. Cultural factors
b. Implementation
c. Due diligence
d. Overcapacity

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