ACC 401-1

ACC 401-1 - ADVANCED ACCOUNTING STUDY GUIDE-JETER/CHANEY...

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ADVANCED ACCOUNTING STUDY GUIDE-JETER/CHANEY 4 TH ED. CHAPTER ONE – INTRODUCTION TO BUSINESS COMBINATIONS I.       BUSINESS COMBINATIONS   business combination  occurs when the operations of two or more companies are  brought under common control.   While merger activity (business combinations) experienced a slowdown in the economic  decline of 2002 through mid-2003, by July of 2003, evidence of renewed interest was  obvious.  This trend continued, and global merger activity passed the one trillion dollar  mark for the first quarter of 2007, the greatest activity on record according to CNN.   II.        NATURE OF THE COMBINATION A. Nature of the combination 1. In a  friendly combination , the boards of directors of the potential  combining companies negotiate mutually agreeable terms of a proposed  combination. The proposal is then submitted to the stockholders of the  involved companies for approval. 2. An  unfriendly (hostile) combination  results when the board of directors  of a company targeted for acquisition resists the combination. A formal  tender   offer  enables the acquiring firm to deal directly with individual  shareholders. B. Defense tactics Resistance often involves various moves by the target company.  Whether or not  such defenses are ultimately beneficial to shareholders remains a controversial  issue. Poison pill:       Issuing stock rights to existing shareholders enabling them  to purchase additional shares at a price below market value, but  exercisable only in the event of a potential takeover.
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Example:          Cisco creates "poison pill" to block takeovers                         by James Niccolai http://www.computerworld.com/home/news.nsf/all/9806125poison   Cisco Systems, Inc. said yesterday that its board of directors has approved a shareholder  rights plan designed to protect the networking company's investors in the event of a  hostile takeover bid.    Known in the business world as a "poison pill," the plan is a strategic maneuver to make  the company's stock less attractive to potential bidders and to encourage bidders to solicit  offerings through the company's board of directors, the San Jose, Calif., company said. A  company spokeswoman said Cisco isn't currently the target of a takeover bid, but added  that such plans aren't uncommon at large corporations.    Under the plan, Cisco shareholders would have the right to acquire for half price one  share in the company for each share held as of June 22. The plan would kick in if a  person or company acquires or announces an offer to acquire 15% or more of the  company's common stock, Cisco said. 
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ACC 401-1 - ADVANCED ACCOUNTING STUDY GUIDE-JETER/CHANEY...

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