A divestiture is the sale of all or substantially all of a business or product l

Question

A divestiture is the sale of all or substantially all of a business or product line to another party for cash, securities or both. True or False      

A Target company is the firm being solicited by the Acquiring Company. True or False       

A Vertical Merger is one in which the merger participants are usually competitors. True or False    

A Joint Ventures is a cooperative business relationship formed by two or more parties to achieve a common strategic objective. True or False    

Operational restructuring refers to the full or partial sale of a business or product lines, or to downsizing by closing unprofitable or non-strategic facilities.   True or False

Holding companies and their shareholders may be subject to triple taxation in a M&A Deal. True or False

Investment bankers offer strategic and tactical advice on acquisition opportunities, as well as screen potential buyers and sellers, make initial contact with a seller or buyer, and provide negotiation support for their clients. True or False

In a statutory merger, both the Acquiring and Target firms survive. True or False  

In a Consolidation, two or more companies join together to form a new firm. True or False

Synergy is the notion that the combination of two or more firms will create value exceeding what either firm could have achieved if they had remained independent. True or False

Chapter 2: Regulatory Issues in M&A

1.Insider trading involves buying or selling securities based on knowledge not available to the general public. True or False

2.Federal antitrust laws exist to prevent individual corporations from assuming too much market power so that they can limit their output and raise prices without concern for any significant competitor reaction. True or False

3.A typical consent decree for firms involved in a merger requires the merging parties to divest overlapping businesses or to restrict anticompetitive practices. True or False

4.The U.S. Securities Act of 1933 requires that all new securities offered to the public must be registered with the SEC. True or False    

5.Mergers and acquisitions are subject to only federal regulation. True or False

6.Whenever either the Acquiring or the Target firm’s stock is publicly traded, the transaction is subject to the reporting requirements relating to federal securities laws. True or False

7.The Williams Act of 1968 consists of a series of amendments to the Securities Act of 1934. It is intended to protect target firms from fast takeovers in which they would not have enough time to adequately assess the value of an Acquirer’s offer. True or False

8.Whenever an investor acquires 5% or more of public company, it must disclose to the SEC its intentions, the identities of all investors, their occupation, sources of financing, and the purpose of the acquisition. True or False

9.A Hart-Scott-Rodino flings provides an initial 30-day time period for the Department of Justice and Federal Trade Commission to review a proposed merger or acquisition transaction. True or False

In the U.S., the Federal Trade Commission has the exclusive right to approve mergers and acquisitions if they are determined to be potentially anti-competitive. True or False

Explanation / Answer

(i) The divestiture of a business unit is the full or partial disposition of a business unit or product line by means of a closure, exchange, sale or bankruptcy. It can be done to reduce leverage on a firm's balance sheet, to wean off non-core businesses of a firm, to satisfy an anti-trust ruling and more. Hence, it is not strictly a sale of a firm's business unit and can be brought about by other means. Therefore, the statement is false.

(ii) A Target firm is the one which is being solicited for a sale or merger by the acquiring firm. Therefore, this statement is true.

(iii) A vertical merger is a merger between two firms operating at two different stages of a product's supply chain. An example would be the merger between an electricity producer and an electricity distributor/transmitter. A merger between two competing firms from the same stage in a product's supply chain is known as a horizontal merger. Hence, this statement is false.

(iv) A joint venture is the coming together of two or more parties, followed by a pooling of resources to achieve a specific business objective either for a single project or a series of projects. In this regard, the statement can be considered to be true.

NOTE: Please raise separate queries for solutions to the remaining sub-parts.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.