FIN 471 Test 2

In a tender offer, which of the following is true? 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, 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

A and B

Which of the following defensive tactic tends to dilute the ownership position of the shareholders of the bidder? Flip-in pills Golden parachutes Fili-over pills Greenmail

Fili-over pills

Which of the following defensive tactic tends to increase the cost of acquisition of the bidder or acquirer? Litigation Fili-over pills Greenmail Golden parachutes Flip-in pills

Flip-in pills

Which of the following defensive tactic tends to strengthen the board of directors of the target? For cause provisions Poison pills Reincorporation Leveraged recapitalization Supermajority rules

For cause provisions

The purpose of the 1968 Williams Act was to Prevent tender offers Protect target firm employees from layoffs Promote tender offers Prosecute target firm shareholders who misuse information Give target firm shareholders time to review takeover proposals

Give target firm shareholders time to review takeover proposals

U.S. antitrust regulators are most concerned about what types of transaction? Horizontal mergers Joint ventures Vertical mergers Alliances Minority investments

Horizontal mergers

Which of the following regulations govern tender offers? Clayton Act Hart-Scott-Rodino Act Sherman Act Williams Act

Williams Act

Which of the following are true about the Sherman Antitrust Act? A, B, and C A and C only Prohibits business combinations that result in monopolies. Prohibits business combinations resulting in a significant increase in the pricing power of a single firm. Makes illegal all contracts unreasonably restraining trade.

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 A, B, and C Market share A and B only Barriers to entry

A, B, and C

The Securities Act of 1933 requires the registration of all securities issued to the public. Such registration requires which of the following disclosures: Description of the firm's properties and business Information about management 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

All of the following are true of proxy contests except that they Are sometimes designed to have certain takeover defenses removed May enable effective control of a firm without owning 51% of the voting stock Are sometimes designed to replace members of the board Are often costly Are usually successful

Are usually successful

Which of the following is NOT a labor law relating to mergers and acquisition? Medical Leave Act Comprehensive Environmental Response, Compensation, and Liability Act Worker Adjustment and Retraining Notification Act Americans with Disabilities Act

Comprehensive Environmental Response, Compensation, and Liability Act

Which of the following regulation or law establishes authority to review the impact of foreign direct investment (including M&As) on national security Regulation FD (Fair Disclosure) U.S. Foreign Corrupt Practices Act Dodd-Frank Wall Street Reform and Consumer Protection Act Exon-Florio Amendment to the Defense Protection Act of 1950

Exon-Florio Amendment to the Defense Protection Act of 1950

All of the following are true about a consent decree except for Requires the merging parties to divest overlapping businesses Consent decrees tend to be most effective in promoting competition if the divestitures made by the acquiring firms are to competitors. An acquirer may seek to negotiate a consent decree in advance of consummating a deal. In the absent of a consent decree, a buyer usually makes the receipt of regulatory approval necessary to closing the deal. FTC studies indicate that consent decrees have historically been largely ineffectual in promoting competition

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 firms undertaking tender offers to file a 14(d)-1 with the SEC Consists of a series of amendments to the 1934 Securities Exchange Act Requires investors acquiring 5% or more of a public company to file a 13(d) with the SEC Requires acquiring firms initiating tender offers to disclose their intentions and business plans Facilitates rapid takeovers over target companies

Facilitates rapid takeovers over target companies

Which is true of the following? A white knight Is a firm which is viewed by management as a more appropriate suitor than the bidder Is a group of dissident shareholders which side with the bidding firm Is a group of the target firm's current shareholders which side with management Is a third party that is willing to acquire the target firm at the same price as the bidder but usually removes the target's management Is a firm that is willing to acquire only a large block of stock in the target firm

Is a firm which is viewed by management as a more appropriate suitor than the bidder

Which of the following is true? A hostile takeover attempt Is one that is resisted by the target's management Supported by the target firm's board and its management Results in lower returns to the target firm's shareholders than a friendly attempt Is generally found to be illegal Is usually successful

Is one that is resisted by the target's management

Which of the following is NOT and advantage of open market purchase as an alternative takeover mechanism? It pressures the target shareholders to sell their stock It may discourage other bidders Profitable to bidder if the target agrees to buy bidder's toehold position It may lower transaction costs

It pressures the target shareholders to sell their stock

Which of the following may not be a provision in the corporate bylaws? Litigation Supermajority voting requirements for approval of mergers A staggered board of directors The inability to remove directors without cause

Litigation

According to the management entrenchment theory, Management resistance to takeover attempts is an attempt to increase the proposed purchase price premium Management attempts to maximize shareholder value Describes the primary reason takeover targets resist takeover bids Management resistance to takeover attempts is an attempt to extend their longevity with the target firm Shareholders tend to benefit when management resists takeover attempts

Management resistance to takeover attempts is an attempt to extend their longevity with the target firm

Which of the following are commonly considered alternative models of corporate governance? Control model and takeover model Market model and control model Market model and takeover model Market model and management entrenchment model Takeover model management entrenchment model

Market model and control model

Antitrust guidelines involve all of the following except for: Market value of the acquirer Potential adverse competitive effects Market concentration Market definition

Market value of the acquirer

Which of the following is true about super-voting stock? Is generally encouraged by the Securities and Exchange Commission (SEC) Is issued to acquiring firms if they agree not to purchase a controlling interest in the target firm Is a commonly used takeover tactic. Is a widely used takeover defense May have 10 to 100 times of the voting rights of other classes of stock

May have 10 to 100 times of the voting rights of other classes of stock

All of the following are true of the Hart-Scott-Rodino Antitrust Improvements Act except for An acquiring firm may agree to divest certain businesses following the completion of a transaction in order to get regulatory approval. Acquisitions involving firms of a certain size cannot be completed until certain information is supplied to the FTC The Act is intended to give regulators time to determine whether the proposed combination is anti-competitive. The FTC may file a lawsuit to block a proposed transaction Only the acquiring firm is required to file with the FTC

Only the acquiring firm is required to file with the FTC

Xon Enterprises is attempting to take over Rayon Group. Rayon's shareholders have the right to buy additional shares at below market price if Xon (considered by Rayon's board to be a hostile bidder) buys more than 15 percent of Rayon's outstanding shares. What term applies to this antitakeover measure? Poison pill Pac Man defense Golden parachute plan Greenmail provision Share repellent plan

Poison pill

All of the following are commonly used takeover tactics, except for Tender offer Litigation Poison pills Bear hug Proxy contest

Poison pills

The following takeover defenses are generally put in place by a firm before a takeover attempt is initiated. Standstill agreements Recapitalization Corporate restructuring Poison pills Greenmail

Poison pills

Which of the following is not a shark repellant defensive tactic? Poison pills Staggered board of directors Supermajority rules Consent solicitation Reincorporation

Poison pills

In determining whether a proposed transaction is anti-competitive, U.S. regulators look at all of the following except for Potential for job loss among target firm's employees The potential for the target firm to fail without the takeover Potential for price fixing Ease of new competitors to enter the market Market share of the combined businesses

Potential for job loss among target firm's employees

The Hart-Scott-Rodino Act requires that firms Pre-notify the government if the combination constitutes a cross-border transaction Pre-notify the government if both acquirer and target firms are small Pre-notify the government after the merger has been completed Pre-notify the government before completing a transaction under certain conditions

Pre-notify the government before completing a transaction under certain conditions

Which of the following is NOT a purpose of the Securities Exchange (SEC) Act of 1934? Defining the content and frequency of periodic reports Preventing the public offering of securities without a registration statement Defining the disclosure requirements for proxy solicitations 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 Restrict foreign investment in individual states Protect workers' pensions Prevent premature announcement of M&As Protect individual investors from investing in fraudulent securities' offerings Allow states to block M&As deemed as anticompetitive

Protect individual investors from investing in fraudulent securities' offerings

Some of Acme Inc.'s shareholders are very dissatisfied with the performance of the firm's current management team and want to gain control of the board. To do so, these shareholders offer their own slate of candidates for open spaces on the firm's board of directors. Lacking the necessary votes to elect these candidates, they are contacting other shareholders and asking them to vote for their slate of candidates. The firm's existing management and board is asking shareholders to vote for the candidates they have proposed to fill vacant seats on the board. Which of the following terms best describes this scenario? Proxy contest Leveraged buyout Merger Divestiture

Proxy contest

All of the following is true about proxy contests except for Proxy materials may be distributed by firms seeking to change the composition of a target firm's board of directors The names and interests of all parties to the proxy contest must be disclosed in the proxy materials 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

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. Retailing Public utilities Banking Communications Defenses

Retailing

Which of the following does not involve corporate restructuring? Selling attractive assets Undertaking a major acquisition Bust-ups Going private Share buy-backs plans

Share buy-backs plans

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? Cash-out provisions Business combination provisions Share control provisions Fair price provisions

Share control provisions

The following regulation establishes criminal penalties for behaviors that unreasonably limit competition Clayton Act Williams Act Sherman Act Hart-Scott-Rodino Act

Sherman Act

Which of the following is NOT a Federal Securities law? Securities Act (1933) Sarbanes-Oxley Act (2002) Williams Act (1968) Sherman Act (1890)

Sherman Act (1890)

The following takeover defense is generally put in place by a firm after a takeover attempt is underway. Fair price provision Standstill agreement Supermajority provision Staggered board Reincorporation

Standstill agreement

Which of the following shark repellant defensive tactic limits the actions of shareholders in mergers and acquisitions? Staggered board of directors Reincorporation Supermajority rules Leveraged recapitalization Poison pills

Supermajority rules

Which of the following factors affecting corporate governance are internal to the firm? Legislation Takeover defenses Proxy contests Institutional shareholders' activism Regulators

Takeover defenses

Which of the following is true about so-called shark repellants? They are put in place to strengthen the board They include poison pills Involve White Knights Often consist of the right to issue greenmail Involve corporate restructuring

They are put in place to strengthen the board

Which of the following factors often affects hostile takeover bids? Target bylaws, takeover premium, composition of the target's BOD and composition of the target's ownership The takeover premium The composition of the ownership of the target's stock The composition of the board of directors (BOD) the target firm The target's bylaws

Target bylaws, takeover premium, composition of the target's BOD and composition of the target's ownership

All of the following are common takeover defenses except for Golden parachutes Litigation Staggered boards Poison pills Tender offers

Tender offers

All of the following are true of tender offers except for Are extended for a specific period of time Tender offers consist only of offers of cash for target stock Must be filed with the SEC Are generally considered an expensive takeover tactic Are sometimes over subscribed

Tender offers consist only of offers of cash for target stock

All of the following are true of antitrust lawsuits except one FTC decisions can be appealed in the federal circuit courts. 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 As an alternative to litigation, a company may seek to negotiate a voluntary settlement of its differences with the FTC. The FTC reviews complaints that have been recommended by its staff and approved by the FTC

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: None of the above The combination increases concentration in an industry substantially The combination would increase efficiency significantly The combination would increase market power

The combination would increase efficiency significantly

All of the following are true of poison pills except for Delays the completion of a takeover attempt Generally prevent takeover attempts from being successful May be removed by the target's board if an attractive bid is received from a so-called "white knight." They are a new class of security Enable target shareholders to buy additional shares in the new company if an unwanted shareholder's ownership exceeds a specific percentage of the target's stock

They are a new class of security