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Topic_26_E2 - Topic 26 Exercise 2 Agency Issues Related to...

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Topic 26, Exercise 2 Agency Issues Related to Mergers Recent research by Julie Wulf at the Wharton Graduate School finds that managers do not always act in the best interest of their shareholders. In her study, she examines a group of friendly mergers of equals and compares it to a group of mergers where the acquiring firms are larger than the target firms. She finds a significant difference in merger premiums for the two groups. A summary of her findings can be found in “CEOs Serve Themselves First in Mergers of Equals.” After reading the article, answer the following questions: 1. How does Professor Wulf define a friendly merger of equals? Give an example from her article. In a friendly merger, the bid by one firm is not opposed by the target firm’s management. The firms involved in the merger would be similar in size as opposed to a very large firm taking over a small firm. The examples cited in the article include: Traveler’s Group and
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