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| 1 | |
The absorption of one firm by another such that the acquired firm no longer exists as a separate entity is called a(n): |
| | A) | acquisition of stock. |
| | B) | merger. |
| | C) | shared agreement. |
| | D) | consolidation. |
| | E) | tender offer. |
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| 2 | |
Which one of the following creates a brand new firm by merging existing entities? |
| | A) | acquisition of stock |
| | B) | merger |
| | C) | shared agreement |
| | D) | consolidation |
| | E) | tender offer |
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| 3 | |
Which one of the following statements is correct? |
| | A) | With a consolidation, the acquiring firm keeps its legal existence but the acquired firm does not. |
| | B) | The acquiring firm acquires the assets, but not the liabilities, of the acquired firm in a merger. |
| | C) | When Babco acquired Sitco it was most likely a consolidation because the combined firm's name was Basit. |
| | D) | The key difference between a merger and a consolidation is that a merger creates an entirely new firm whereas a consolidation does not. |
| | E) | With a merger, the shareholders of the acquiring firm are granted appraisal rights. |
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| 4 | |
Appraisal rights: |
| | A) | grant any synergy benefits from a merger to the shareholders of the acquired firm. |
| | B) | are designed to eliminate the need for legal battles in connection with a merger. |
| | C) | allow the shareholders of an acquired firm to determine the value that is to be placed on the remaining "shell" of their firm after a merger. |
| | D) | are granted to all involved shareholders in a merger to ensure both the shareholders of the acquiring firm and the acquired firm receive adequate value from a merger. |
| | E) | allow the shareholders of an acquired firm to demand fair value for their shares. |
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| 5 | |
Which of the following are correct regarding mergers?
I. A disadvantage of a merger is that it requires the approval of the shareholders of both the acquiring and the acquired firms.
II. A disadvantage of a merger is that it is legally complex.
III. An advantage of a merger is that it is relatively inexpensive compared to other forms of acquisitions.
IV. An advantage of a merger is the avoidance of the need to transfer title of the individual assets of the acquired firm to the acquiring firm. |
| | A) | I and III only |
| | B) | II and IV only |
| | C) | III and IV only |
| | D) | I, III, and IV only |
| | E) | I, II, III, and IV |
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| 6 | |
A tender offer is: |
| | A) | a public offer to purchase shares of a target firm. |
| | B) | the last step in the consolidation of two firms. |
| | C) | the initial offer made by the acquiring firm to the dissenting shareholders of the acquired firm in a merger proceeding. |
| | D) | an additional amount of compensation offered to a dissenting shareholder of an acquired firm in a merger. |
| | E) | a fair price offer by an acquiring firm's shareholders in accordance with their appraisal rights. |
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| 7 | |
Which one of the following statements is correct? |
| | A) | In an acquisition of stock, it is board approval rather than shareholder approval that is required. |
| | B) | The managers of a target firm rarely get involved in an acquisition of stock. |
| | C) | Shareholders are not required to formally vote on an acquisition of stock. |
| | D) | Acquisition of a target firm by a tender offer always leads to a complete absorption of the target firm. |
| | E) | Acquisitions of stock rarely result in a formal merger. |
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| 8 | |
Which one of the following is a transaction which must be approved by a formal vote of the shareholders of the selling firm and which, when completed, leaves the selling firm as a corporate shell? |
| | A) | consolidation |
| | B) | merger |
| | C) | acquisition of stock |
| | D) | acquisition of assets |
| | E) | tender offer |
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| 9 | |
The title for each asset owned by the acquired, or target, firm must be officially transferred in which one of the following? |
| | A) | acquisition of assets |
| | B) | tender offer |
| | C) | merger |
| | D) | acquisition of stock |
| | E) | consolidation |
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| 10 | |
Which of the following correctly depict differences between a merger and an acquisition of stock? |
| | A) | A formal vote by the acquired firm's shareholders is required for an acquisition of stock but not for a merger. |
| | B) | The acquiring firm can deal directly with the shareholders of the acquired firm when a merger, but not an acquisition of stock, is the means of acquisition. |
| | C) | An acquisition of stock results in the total absorption of a firm whereas a merger does not. |
| | D) | Shareholders of the acquired or target firm vote by their response to a tender offer in an acquisition of stock but cast a formal vote in a merger situation. |
| | E) | The acquiring firm can bypass the management of an acquired or target firm in a merger but not in an acquisition of stock. |
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