Chapter 23: Corporate Restructuring

Under Chapter(s) _____________________ of the bankruptcy laws, a company continues to operate while it attempts to work out a reorganization plan.

11

Chapter 11 bankruptcy proceedings may be initiated by ____________ or more of its unsecured creditors who have aggregate claims of at least _____________.

3, $500

Under Chapter(s) ______________________ of the bankruptcy laws, a company's assets are sold off and the proceeds are distributed to the creditors.

7

Which of the following would be considered a reason for corporate restructuring? I. Availability of credit II. Low cost of credit

Both statements I and II are correct

_________________ equal the capitalized value of the company's operating earnings minus its liabilities

Going-concern value

An antitakeover measure where a company attempts to buy back its shares of stock at a premium from the company or investor who initiated the unfriendly takeover is:

Greenmail

In a ___________ form of business combination, a parent-subsidiary relationship exists between the acquiring and the acquired companies.

Holding company

In general, the greatest economies of scale are possible with _______________ mergers.

Horizontal

______________ equals the proceeds that would be received from the sale of the firm's assets minus its liabilities.

Liquidation vlaue

Which of the following about an asset purchase merger transaction is/are correct? I. Only the assets are purchased. II. The buying firm receives 100% of the assets and incurs only 50% of the liabilities.

Only statement I is correct.

In the _______________ method of combining financial accounts in a merger, the acquired company's assets are recorded on the acquiring company's books at their cost (net of depreciation) when originally acquired.

Pooling of interests

In the _____________ method of accounting for mergers, the total value paid or exchanged for the acquired firm's assets is recorded on the acquiring company's books.

Purchase

An anti-takeover measure that is inserted in the corporate charter stating that 80% of the stock shares must approve the takeover proposal is a(n):

Supermajority voting rules

An antitakeover measure that is employed after the takeover has been initiated is:

White knight

A plan of reorganization must be all of the following EXCEPT:

a plan wherby the creditors that are due the most money are paid first.

The process of liquidating a business outside of the jurisdiction of the bankruptcy courts is called a(n)

assignment

A reorganization plan is reviewed by the _____________ for fairness and feasibility.

bankruptcy court and the SEC

All of the following are anti-takeover measures except:

black knight

The major methods typically used to value merger candidates include all of the following EXCEPT

bottom line comparison method

A(n) ___________________ is a situation in which a failing business is permitted to discharge its debt obligations by paying less than the full amounts owed to creditors.

composition

A combination of two or more companies in which neither competes directly with the other and no buyer-seller relationship exists is known as a

conglomerate merger

A combination in which all of the combining companies are dissolved and a new firm is formed is known as a _____________

consolidation

Which of the following terms are NOT associated with mergers and acquisitions?

declaration of bankruptcy

The most correct method of valuing a merger candidate is:

discounted cash flow method

The reasons why a company may choose external growth by merger over internal growth include

economies of scale, tax considerations, and more rapid growth

In analyzing a merger the ___________ is the number of the acquiring company shares received per share of acquired company stock owned.

exchange ratio

The ________________ is the number of acquiring company shares received per share of acquiring company stock owned.

exchange ratio

A(n) ____________________ is a situation in which a failing business is permitted to lengthen the amount of time it has to meet its obligations with creditors.

extension

The basic methods used in combining the financial accounts in a merger include all of the following EXCEPT the

goodwill consolidation method

What is a form of business combination in which a company purchases all or a controlling block of another company's common shares and the two companies before affiliated?

holding company

A combination of two or more companies that compete directly with each other is known as a

horizontal merger

Bankruptcy occurs when the firm

is unable to pay its debts and files a bankruptcy petition in accordance with the Federal bankruptcy laws

A form of business combination in which two (unaffiliated) companies contribute financial and/or physical assets, as well as personnel, to a new company to engage in some economic activity is known as a _________________.

joint venture

Employee Stock Ownership Plans (ESOPs) are useful instruments for financing leveraged buyouts because in an ESOP transaction

lenders can offer below market interest rates

The acquisition of a company in which the buyer borrows a large amount of the purchase price, using the purchased assets as collateral for a large portion of the borrowings, is knows as a ____________.

leveraged buyout

Legal bankruptcy proceedings focus on the decision of whether or not the firm's value as a going concern is greater than its

liquidation value

Forms of business combinations include:

mergers, consolidations, and holding companies

One anti-takeover measure is the ________________, where the target company makes a takeover bid for the stock of the bidder.

pacman defense

An example of a passive institutional investor is a:

pension fund

A bond that contains a put option that can be exercise only if an unfriendly takeover occurs, is an example of a ________________.

prison pill

In the ____________ method for combining financial accounts in a merger, the total value paid or exchanged for the acquired company's assets is recorded on the acquiring company's books.

purchase

The accounting method used in most mergers is the ____________ method.

purchase

One reason for a company to spin-off a division is to:

remove an under-performing unit

In a(n) _________________ common stock in a division or subsidiary is distributed to shareholders of the parent company on a pro rata basis.

spin-off

When the net income of the combined companies after merger exceeds the sum of the net incomes prior to the mergers, _______________________ is said to exist.

synergy

When the market value of a company's common stock is below the replacement value of the firm's net assets, this company is frequently referred to as a possible ___________________.

takeover candidate

In a __________________, the acquiring company effectively announces that it will pay a certain price above the current existing price for a merger candidate's shares.

tender offer

Technical insolvency occurs when

the firm is unable to meet its current obligations ans they come due, even though the value of its assets exceeds its liabilities

Legal insolvency occurs when

the recorded value of the firm's assets is less than the recorded value of its liabilities

A firm is technically insolvent when: it is unable to meet it's current obligations and:

the value of its assets exceeds the value of its liabilities

An alternative to a spin-off is a(n) ______________________ which allows a large company to capture the value of a high-growth business buried within the organization.

tracking stock

A combination of two or more companies that have a buyer-seller relationship with each other is known as a

vertical merger