Fin 471 Test 1
Which of the following are true about the Sherman Antitrust Act? A, B, and C Makes illegal all contracts unreasonably restraining trade. Prohibits business combinations resulting in a significant increase in the pricing power of a single firm. A and C only Prohibits business combinations that result in monopolies.
A, B, and C
Which of the following are used by antitrust regulators to determine whether a proposed transaction will be anti-competitive? Number of substitute products Market share A and B only Barriers to entry A, B, and C
A, B, and C
Which of the following are often participants in the acquisition process? Proxy solicitors Accountants Investment bankers All of the above Lawyers
All of the above
Which of the following represent alternative ways for businesses to reap some or all of the advantages of M&As? Strategic alliances, minority investments, and licensing Joint ventures and strategic alliances Minority investments, alliances, and licensing All of the above Franchises, alliances, joint ventures, and licensing
All of the above
Which of the following is true only of a consolidation? The entity resulting from the combination assumes ownership of the assets and liabilities of the acquiring firm only. One party to the combination disappears More than two firms are involved in the combination One company becomes a wholly owned subsidiary of the other. All parties to the combination disappear
All parties to the combination disappear
Which of the following are generally considered restructuring activities? An acquisition A divestiture A merger All the options provided A consolidation
All the options provided
The Securities Act of 1933 requires the registration of all securities issued to the public. Such registration requires which of the following disclosures: Information about management Description of the firm's properties and business Description of the securities Financial statements audited by public accountants All the options provided in this question.
All the options provided in this question.
Which of the following represent important shortcomings of using industry concentration ratios to determine whether the combination of certain firms will result in an increase in market power? Frequent inability to define what constitutes an industry Failure to measure ease of entry or exit for other firms Failure to account properly for the distribution of firms of different sizes All the provided in this question Failure to account for foreign competition
All the provided in this question
Which of the following regulation or law establishes authority to review the impact of foreign direct investment (including M&As) on national security Dodd-Frank Wall Street Reform and Consumer Protection Act Exon-Florio Amendment to the Defense Protection Act of 1950 U.S. Foreign Corrupt Practices Act Regulation FD (Fair Disclosure)
Exon-Florio Amendment to the Defense Protection Act of 1950
In determining whether a proposed transaction is anti-competitive, U.S. regulators look at all of the following except for Potential for price fixing Ease of new competitors to enter the market Market share of the combined businesses The potential for the target firm to fail without the takeover Potential for job loss among target firm's employees
Potential for job loss among target firm's employees
he Hart-Scott-Rodino Act requires that firms Pre-notify the government if both acquirer and target firms are small Pre-notify the government before completing a transaction under certain conditions Pre-notify the government if the combination constitutes a cross-border transaction Pre-notify the government after the merger has been completed
Pre-notify the government before completing a transaction under certain conditions
The creation of an independent company through the sale or distribution of new shares of an existing business or division of a parent company most appropriately describes a Spin-off Sell-off Tracking stock Carve-out Divestiture
Spin-off
A merger in which the target becomes the subsidiary of the bidder but continues to operate under its own name although it is owned and controlled by the bidder is called Subsidiary merger Stand-alone merger Statutory merger (acquisition) Reverse merger Statutory consolidation
Subsidiary merger
Which of the following is not true of financial synergy? A and B Results from a better matching of investment opportunities available to the firm with internally generated funds Tends to spread the firm's fixed expenses over increasing levels of production Enables larger firms to experience lower average security underwriting costs than smaller firms Tends to reduce the firm's cost of capital
Tends to spread the firm's fixed expenses over increasing levels of production
All of the following are true of antitrust lawsuits except one FTC decisions can be appealed in the federal circuit courts. The FTC reviews complaints that have been recommended by its staff and approved by the FTC As an alternative to litigation, a company may seek to negotiate a voluntary settlement of its differences with the FTC. The FTC files lawsuits in most cases they review. FTC guidelines commit the FTC to make a final decision within 13 months of a complaint
The FTC files lawsuits in most cases they review.
Which one of the following is not a reason for regulators to reject a proposed merger: The combination would increase efficiency significantly The combination increases concentration in an industry substantially None of the above The combination would increase market power
The combination would increase efficiency significantly
Economies of scale exist when: The cost of finding a trading partner is low. The firm is too large and too diversified A firm's decision to hire additional inputs does not result in an increase in the price of inputs The firm is too small and too specialized The long-run cost of producing a unit of output falls as the output increases
The long-run cost of producing a unit of output falls as the output increases
The purpose of a "fairness" opinion from an investment bank is To satisfy Securities and Exchange Commission filing requirements To support the buyer's negotiation effort To assist acquiring management in the evaluation of takeover targets To evaluate for the target's board of directors the appropriateness of a takeover offer price A and B
To evaluate for the target's board of directors the appropriateness of a takeover offer price
Which one of the following is not an example of a horizontal merger? Hewlett Packard and Compaq Computer combine NationsBank and Bank of America combine SBC Communications and Ameritech Communications combine Exxon and Mobil Oil combine U.S. Steel and Marathon Oil combine
U.S. Steel and Marathon Oil combine
In October 2016, AT&T acquired Time Warner for $85.4 billion. Which of the following terms best describes this deal? Horizontal merger Congeneric merger Vertical merger Conglomerate merger Tender offer
Vertical merger
Which of the following regulations govern tender offers? Hart-Scott-Rodino Act Sherman Act Williams Act Clayton Act
Williams Act
Which of the following is generally a way that LBOs can help a firm realize its potential value? The acquisition reduces the likelihood of competition in the industry The transaction reduces the disparity between a firm's actual and potential price The transaction requires debt repayment with future free cash flow leaving management no discretion over the investment of these funds The buyout gives the bidder an opportunity to adjust the makeup and management structure of the target The synergies created allow for cost savings
he buyout gives the bidder an opportunity to adjust the makeup and management structure of the target
All of the following are true of the Hart-Scott-Rodino Antitrust Improvements Act except for The FTC may file a lawsuit to block a proposed transaction An acquiring firm may agree to divest certain businesses following the completion of a transaction in order to get regulatory approval. The Act is intended to give regulators time to determine whether the proposed combination is anti-competitive. Only the acquiring firm is required to file with the FTC Acquisitions involving firms of a certain size cannot be completed until certain information is supplied to the FTC
Only the acquiring firm is required to file with the FTC
The following is not a shrinkage strategy of creating value for the shareholders Equity curve-out Divestiture Organic growth Liquidation Management buy-out
Organic growth
In a tender offer, which of the following is true? A, B, and C Information must be disclosed only to the SEC and not to the exchanges on which the target's shares are traded A and B The target's management cannot advise its shareholders how to respond to a tender offer until has disclosed certain information to the SEC Both acquiring, and target firms are required to disclose their intentions to the SEC
A and B
Buyers often prefer "friendly" takeovers to hostile ones because of all of the following except for: Avoid an auction environment Facilitate post-merger integration Can often be consummated at a lower price The target firm's management recommends approval of the takeover to its shareholders A shareholder vote is seldom required
A shareholder vote is seldom required
Which of the following is an example of economies of scope? Declining average fixed costs due to increasing levels of capacity utilization Shifting production from an underutilized facility to another to achieve a higher overall operating rate and shutting down the first facility The divestiture of a product line A single computer center supports multiple business units Amortization of capitalized software
A single computer center supports multiple business units
Which of the following is NOT a labor law relating to mergers and acquisition? Comprehensive Environmental Response, Compensation, and Liability Act Worker Adjustment and Retraining Notification Act Americans with Disabilities Act Medical Leave Act
Comprehensive Environmental Response, Compensation, and Liability Act
Which of the following type of merger is closely linked to economies of scope? Horizontal mergers Product extension Congeneric mergers Conglomerate mergers Market extension
Conglomerate mergers
Pacific Surfware acquired Surferdude and as part of the transaction, both of the firms ceased to exist in their form prior to the transaction and combined to create an entirely new entity, Wildly Exotic Surfware. Which one of the following terms best describes this transaction? Tender offer Divestiture Spinoff Joint venture Consolidation
Consolidation
Which of the following is not a way managers generally benefit from acquisitions? Political power Consolidation of other senior executives from target Increased compensation Shielding against risk through diversification Social prominence
Consolidation of other senior executives from target
All of the following are true about a consent decree except for Requires the merging parties to divest overlapping businesses An acquirer may seek to negotiate a consent decree in advance of consummating a deal. FTC studies indicate that consent decrees have historically been largely ineffectual in promoting competition In the absent of a consent decree, a buyer usually makes the receipt of regulatory approval necessary to closing the deal. Consent decrees tend to be most effective in promoting competition if the divestitures made by the acquiring firms are to competitors.
FTC studies indicate that consent decrees have historically been largely ineffectual in promoting competition
All of the following are true of the Williams Act except that it Requires investors acquiring 5% or more of a public company to file a 13(d) with the SEC Requires firms undertaking tender offers to file a 14(d)-1 with the SEC Facilitates rapid takeovers over target companies Consists of a series of amendments to the 1934 Securities Exchange Act Requires acquiring firms initiating tender offers to disclose their intentions and business plans
Facilitates rapid takeovers over target companies
The purpose of the 1968 Williams Act was to Promote tender offers Prevent tender offers Give target firm shareholders time to review takeover proposals Protect target firm employees from layoffs Prosecute target firm shareholders who misuse information
Give target firm shareholders time to review takeover proposals
Economies of scope exist when: Greater experience in producing multiple products reduces average cost Doubling factor input doubles output A fall in wages reduces average cost Changing the mix of production reduces average cost. Increasing returns applies in the short run
Greater experience in producing multiple products reduces average cost
U.S. antitrust regulators are most concerned about what types of transaction? Vertical mergers Alliances Horizontal mergers Minority investments Joint ventures
Horizontal mergers
One of the following institutions is least likely to be a financier in M&A deals. Which one? Investment bankers Venture capitalists Angel investors Sovereign wealth funds Angel investors
Investment bankers
All of the following are considered business alliances except for Joint ventures Franchises Mergers Licensing agreements Minority investments
Joint ventures
An investor group borrowed the money necessary to buy all of the stock of a company. Which of the following terms best describes this transaction? Leveraged buyout Joint venture Consolidation Tender offer Merger
Leveraged buyout
An acquisition where a firm is acquired by external party which happens to be the management team of another firm is referred to as Divestiture Leverage buyout (LBO) Management buy-in (MBI) Management buy-out (MBO) Leverage recapitalization
Management buy-in (MBI)
Antitrust guidelines involve all of the following except for: Market definition Potential adverse competitive effects Market concentration Market value of the acquirer
Market value of the acquirer
Examining which of the following is broadly considered one of the easiest ways to measure diversifying activity? Joint Ventures Internal Business Development Mergers and acquisitions Collaborative agreements Strategic Alliances
Mergers and acquisitions
Which of the following is NOT a purpose of the Securities Exchange (SEC) Act of 1934? Defining the disclosure requirements for proxy solicitations Defining the content and frequency of periodic reports Preventing the public offering of securities without a registration statement Revocation of registration of a security if issuer violates any provision of the 1934 Act
Preventing the public offering of securities without a registration statement
State "blue sky" laws are designed to Prevent premature announcement of M&As Protect workers' pensions Protect individual investors from investing in fraudulent securities' offerings Allow states to block M&As deemed as anticompetitive Restrict foreign investment in individual states
Protect individual investors from investing in fraudulent securities' offerings
All of the following is true about proxy contests except for Proxy materials may be distributed by the target firm seeking to influence how their shareholders vote on a particular proposal Proxy materials must be filed with the SEC immediately following their distribution to investors The names and interests of all parties to the proxy contest must be disclosed in the proxy materials Target firm proxy materials must be filed with the SEC. Proxy materials may be distributed by firms seeking to change the composition of a target firm's board of directors
Proxy materials must be filed with the SEC immediately following their distribution to investors
Which of the following is among the least regulated industries in the U.S. Defenses Public utilities Retailing Banking Communications
Retailing
A merger in which the bidder merges into the target and the shareholders of the bidder get stock in the target which becomes a stock acquisition by the bidder most likely defines Congeneric merger Conglomerate merger Reverse merger Vertical merger Concentric merger
Reverse merger
Which of the following is the state anti-trust provision which requires that bidders to obtain prior approval from stockholders holding large blocks of target stock, once the bidder's purchase of stock exceed some threshold level? Share control provisions Cash-out provisions Fair price provisions
Share control provisions
The following regulation establishes criminal penalties for behaviors that unreasonably limit competition Sherman Act Hart-Scott-Rodino Act Clayton Act Williams Act
Sherman Act
Which of the following is NOT a Federal Securities law? Sarbanes-Oxley Act (2002) Securities Act (1933) Williams Act (1968) Sherman Act (1890)
Sherman Act (1890)