SampleMT2 - Examcoverage Lectures Targets Coursematerial...

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Exam coverage Lectures: Targets Course material Lectures Related Chapters Targets Defense 18,19 Evaluating Effectiveness 8 Restructuring and Divestitures 11-13 Financing 4,14 Principal/Agent 15-16 Corporate Governance 20 Cases Time's entry into the entertainment industry Sherritt Gordon
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Chapter 4 ____ A stock-for-stock transaction is generally taxable. ____ To avoid the taxability of an acquisition it is best to use all cash. ____ By increasing leverage a merger can achieve tax savings. Chapter 8 ____ While the returns to targets in mergers and takeovers are clearly positive, it is unclear if acquirers experience positive returns. ____ Empirical studies show target gains are clearly positive and, on average, roughly range from 20 to 40%. ____ Some authors have suggested that CAR event studies may understate total shareholder gains due to the market's ability to anticipate with some probability merger and takeover targets before deals are actually proposed. Chapter 11 ____ Divestitures are related to M&A activity in that in the 1990s about 25 to 35% of acquisition activities represented divestitures by other firms. ____ An equity carve-out typically involves separation of the subsidiary from the parent company, while a spin-off involves the sale of a fraction of the subsidiaries' equity in order to raise funds for the parent. ____ Firms resisting unwanted takeover offers are always reluctant to divest the most valuable parts of their companies, the "crown jewels," fearing that such a sale could precipitate additional takeover threats. Chapter 12 ____ The benefits of equity carve-outs, such as the possibility of valuing the subsidiary separately from the parent company, are usually exceeded by increased administration expenses and the erosion of the authority of the parent company. ____ The use of tracking stock gives investors a quasi-pure play opportunity while preserving benefits of a consolidated entity such as company operating synergies. ____ Sell-offs and split-ups may enhance management incentives since consolidated financial statements may obscure the performance of individual units. Chapter 13
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SampleMT2 - Examcoverage Lectures Targets Coursematerial...

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