conceptSM_ch30 - CONCEPT QUESTIONS CHAPTER 30 30.1 What is...

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CONCEPT QUESTIONS - CHAPTER 30 30.1 What is a merger? How does a merger differ from other forms of acquisition? A merger is the absorption of one firm by another, where the acquiring firm retains its identity and the acquired firm ceases to exist. It differs from other forms of acquisition in that no new firm is created, and there is no need of buying the individual assets of the acquired firm or its stock. What is a takeover? It is the transference of control of a firm from one group of shareholders to another by means of a majority vote of the board of directors. 30.2 What factors influence the choice between a taxable and a tax-free acquisition? There are two factors to consider when comparing a tax-free acquisition and a taxable acquisition: The capital gains effect, and the write-up effect. What is the write-up effect in a taxable acquisition? In a taxable acquisition, the assets of the selling firm are revalued or “written up” from their historical book value to their estimated current market value.
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