You are in browse mode. You must login to use MEMORY

level: Level 1

Questions and Answers List

level questions: Level 1

Question	Answer
The BOD of the potential combining companies negotiates mutually agreeable terms of a proposed combination	Friendly combination
The BOD of a company targeted for acquisition resists the combination	Unfriendly combination (hostile takeovers)
An amendment of the Articles of incorporation or by-laws to make it more difficult to obtain stockholder approval for a takeover	Poison pill
Acquisition of common stock presently owned by the prospective acquiring (acquirer) company	Greenmail
A search for a candidate to be the acquirer in a friendly takeover	White knight or White squire
attempting on unfriendly takeover of the would be acquiring company	Pac-man defense
The sale of valuable assets to others to make the firm less attractive to the "would be acquirer"	Selling the "Crown Jewels" or "Scorched Earth"
acquisition of substantial amounts of outstanding common stock for the treasury or for the retirement, or the incurring of substantial long term debt in exchange for outstanding common stock	Shark repellent
management desires to own the business, arrange to buy out the stockholders using the company's assets to finance the deal	Leveraged buyouts
an attempt to discredit one's competitor, opponent, etc., by malicious or scandalous attacks	Mudslinging defense
When a major reason for an attempted takeover is the prospective acquiring (acquirer) company's favorable cash position, the prospective acquiring (acquirer) company may try to rid itself of this excess cash by attempting to takeover of its own	Defensive acquisition tactic
What are the types of business combinations?	based on the structure of the combination, the method used to accomplished the combination, the accounting method used
What are the Reasons for Business Combinations? Explain each.	Cost advantage, lower risk, avoidance of takeovers, acquisition of intangible assets, other reasons
involves companies within the same industry that have previously been competitors	horizontal integration
take place between two companies involved in the same industry but at different levels	vertical integration
entails some diversification, but does not have a drastic change in operation as a conglomerate	circular combination
involving companies in unrelated industries having little, If any, production or market similarities for the purpose of entering into new markets or industries	conglomerate combination
Books of the acquired company are closed out, its assets and liabilities are transferred to the books of the acquirer	acquisition of net assets
• Acquirer acquires voting (common) stock from another enterprise for cash or other property, debt instruments, and equity instruments, or combination • Acquirer must obtain control by purchasing 50% or more of the voting stock or possibly less • Acquired company need not be dissolved	Acquisition of Common Stock
Acquisition by one firm of assets (and possibly liabilities) of another firm, but not its shares	Asset Acquisition
Acquirer survives	Statutory Merger
Acquired company ceases to exist as a separate legal entity	Statutory Merger
New corporation is formed to acquire two or more other corporations	Statutory Consolidation
X company + Y company = X company or Y company	Statutory Merger
Acquired corporation cease to exist as separate legal entities	Statutory Consolidation
Books of the acquirer and the acquired company remain intact and consolidated financial statements are prepared periodically	Acquisition of Common Stock
Stockholders of the acquired companies (X,Y) become stockholders in the new entity (Z)	Statutory Consolidation
X company + Y company = Z company	Statutory Consolidation
Acquisition of Net Assets Classification	Statutory Merger, Statutory Consolidation
In accounting, refers to the accounting process or procedures of combining parent and subsidiary financial statements	consolidation
• Acquirer acquires the net assets of the other enterprise for cash or other property, debt instruments, and equity instruments, or combination • Acquirer must acquire 100% of the net assets of the acquired company • It only involves when the acquirer survives	Acquisition of Net Assets
All but one of the combining companies go out of existence	merger
All the combining companies are dissolved	consolidation
New corporation is formed to take over their net assets	consolidation
"true mergers", "mergers of equals"	business combination
A transaction or other event in which an acquirer obtains control of one or more businesses	business combination
three elements must involve the acquisition of a business	inputs, process, output
economic resource merely need to have the ability to contribute to the creation of outputs	input
system, standard, protocol, convention, or rule that when applied to an input or inputs, creates outputs	process
the result of inputs and processes, that provide goods or services to customers, generate income	output