Chapter 17: Mergers, acquisitions and corporate control

Bavarian Brew is acquiring Dutch Brew in a pure stock exchange merger. Bavarian Brew has a current share price of €55 and sets an exchange ratio of 0.65 for Dutch Brew, which has 75 million shares outstanding that currently trade at €30. Six months later the price of Bavarian Brew has dropped to €48. If you owned 100 shares of Dutch Brew, what is the control premium at this point?
1. 8%
2. 7%
3. 4%
4. 2%
Bavarian Brew is acquiring Dutch Brew in a pure stock exchange merger. Bavarian Brew has a current share price of €55 and sets an exchange ratio of 0.65 for Dutch Brew, which has 75 million shares outstanding. How many new shares will Bavarian Brew issue to exchange Dutch Brew's shares?
1. 75.00 million shares
2. 62.25 million shares
3. 48.75 million shares
4. 35.50 million shares
The efficiency enhancing effect resulting from a strategic merger is called the:
1. merger effect.
2. acquisition effect.
3. synergy effect.
4. efficiency effect.
Firm A is acquiring firm B. Neither firm has any debt. The incremental value of the proposed acquisition is estimated to be €725,000. The acquisition price for firm B is €45 per share in cash.

Firm A Firm B

# of shares 60,000 25,000

price/share €75 €43

What is the NPV of acquiring firm B?
1. €675,000
2. €1,125,000
3. €1,550,000
4. €450,000
A combination of competitors within the same geographic market is called a(n):
1. horizontal merger.
2. vertical merger.
3. market extension merger.
4. bust up.
Bavarian Brew is acquiring Dutch Brew in a pure stock exchange merger. Bavarian Brew has a current share price of €55 and sets an exchange ratio of 0.65 for Dutch Brew, which has 75 million shares outstanding. If you owned 100 shares of Dutch Brew, what would be the value of your shares after the exchange?
1. €5,500
2. €4,250
3. €2,125
4. €3,575
Firm A is acquiring firm B. Neither firm has any debt. The incremental value of the proposed acquisition is estimated to be €550,000. The acquisition price for firm B is €1,500,000 and can be paid in cash or in shares.

Firm A Firm B

# of shares 125,000 55,000

price/share €38 €25

What is the value of firm B to firm A?
1. €1,925,000
2. €3,450,000
3. €1,250,000
4. €2,125,000
Firm A is acquiring firm B. Neither firm has any debt. The incremental value of the proposed acquisition is estimated to be €550,000. The acquisition price for firm B is €1,500,000 and can be paid in cash or in shares.

Firm A Firm B

# of shares 125,000 55,000

price/share €38 €25

What is the value of the post merger firm following a cash acquisition?
1. €425,000
2. €7,350,000
3. €4,625,000
4. €5,175,000
Firm A is acquiring firm B. Neither firm has any debt. The incremental value of the proposed acquisition is estimated to be €725,000. The acquisition price for firm B is €45 per share in cash.

Firm A Firm B

# of shares 60,000 25,000

price/share €75 €43

What is the merger premium per share?
1. €5
2. €7
3. €2
4. €4
Firm A is acquiring firm B. Neither firm has any debt. The incremental value of the proposed acquisition is estimated to be €550,000. The acquisition price for firm B is €1,500,000 and can be paid in cash or in shares.

Firm A Firm B

# of shares 125,000 55,000

price/share €38 €25

What is the price per share of the post merger firm following a cash acquisition?
1. €38.00
2. €31.50
3. €41.40
4. €44.20

	Firm A	Firm B
# of shares	60,000	25,000
price/share	€75	€43

	Firm A	Firm B
# of shares	125,000	55,000
price/share	€38	€25

	Firm A	Firm B
# of shares	125,000	55,000
price/share	€38	€25

	Firm A	Firm B
# of shares	60,000	25,000
price/share	€75	€43

Chapter 17: Mergers, acquisitions and corporate control

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