Chapter 26 Mergers and Acquisitions

d1 = [ln($20,000,000/$8,000,000) + (.035 + .452/2)(4)]/[.45(4.5)]
d1 = 1.62366

d2 = 1.62366 − [.45(4.5)]
d2 = .72366

N(d1) = .94778
N(d2) = .76536

Equity = $20,000,000(.94778) − ($8,000,000e−.035(4))(.76536)
Equity = $13,632,521

Δ in equity = $13,632,521 − 14,180,806
Δ in equity = −$548,285


Student name:
1) Ehlinger Investments announced today that it has acquired all of the assets and liabilities
of Thompson Equity. The combined firm will be known as Ehlinger Investments; Thompson
Equity no longer exists as a separate entity. This acquisition is best described as a:

1)


A) merger.
B) consolidation.
C) tender offer.
D) spinoff.
E) divestiture.



Question Details
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Difficulty : 1 Basic
Learning Objective : 26-01 Discuss the different types of mergers and acquisitions, why they should (
Section : 26.1 The Legal Forms of Acquisitions
Topic : Types of mergers and acquisitions
AACSB : Reflective Thinking
Bloom's : Remember

,2) A press release issued today announced that Ingram Distribution has acquired Johnson
Transport. The press release explained that both firms ceased to exist in their prior forms and had
combined to create an entirely new entity called Move! Which one of the following terms best
describes this transaction?

2)


A) Divestiture
B) Consolidation
C) Tender offer
D) Spinoff
E) Conglomeration



Question Details
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Difficulty : 1 Basic
Learning Objective : 26-01 Discuss the different types of mergers and acquisitions, why they should (
Section : 26.1 The Legal Forms of Acquisitions
Topic : Types of mergers and acquisitions
AACSB : Reflective Thinking
Bloom's : Remember




3) An advertisement in today’s newspaper announced that Okafor Productions was willing
to purchase shares of its competitor, Eagles Events. Which one of the following terms best
describes this announcement?

3)


A) Merger request
B) Consolidation
C) Tender offer
D) Spinoff
E) Divestiture

,Question Details
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Difficulty : 1 Basic
Learning Objective : 26-01 Discuss the different types of mergers and acquisitions, why they should (
Section : 26.1 The Legal Forms of Acquisitions
Topic : Types of mergers and acquisitions
AACSB : Reflective Thinking
Bloom's : Remember




4) Which one of these statements is false?
4)


A) Acquisitions are sometimes unfriendly.
B) Shareholders of the target firm must vote to approve an acquisition by stock.
C) The cost of a stock acquisition can be higher than the cost of a merger if the target
firm’s management resists.
D) The complete absorption of one firm by another requires a merger.
E) In stock acquisitions the bidding firm deals directly with the target firm’s
shareholders.



Question Details
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Difficulty : 1 Basic
Learning Objective : 26-01 Discuss the different types of mergers and acquisitions, why they should (
Section : 26.1 The Legal Forms of Acquisitions
Topic : Types of mergers and acquisitions
AACSB : Reflective Thinking
Bloom's : Understand




5) A group of individual investors has begun acquiring all of the publicly traded shares of
Ghirmal Communications. Once the shares are acquired, they will no longer be publicly traded.
Which of the following terms applies to this process?

5)

, A) Tender offer
B) Proxy contest
C) Going-private transaction
D) Merger
E) Consolidation



Question Details
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Difficulty : 1 Basic
Learning Objective : 26-01 Discuss the different types of mergers and acquisitions, why they should (
Section : 26.1 The Legal Forms of Acquisitions
Topic : Types of mergers and acquisitions
AACSB : Reflective Thinking
Bloom's : Remember




6) Several high-level employees of Schooler & Smith have decided to form a private
investment group for the sole purpose of purchasing Schooler & Smith. The group will employ
borrowed funds to obtain 85 percent of its offer price. The purchase of Schooler & Smith is
referred to as a:

6)


A) conglomeration.
B) proxy contest.
C) merger.
D) management buyout.
E) consolidation.