Question 11.S-tQ.2: Briefly outline the financial reasons used to justify acquis...
Briefly outline the financial reasons used to justify acquisitions.
The financial benefits that may be gained by shareholders via a takeover will include:
- financial synergy, i.e. a decrease in the cost of capital;
- acquisition of an undervalued target (unlikely if markets are efficient);
- benefit from relative tax considerations;
- increase in EPS or boot-strapping (not accepted as a justification).
Related Answered Questions
Question: 11.S-tQ.3
Verified Answer:
A number of arguments have been advanced against u...
Question: 11.S-tQ.4
Verified Answer:
There is no consensus view on why mergers and take...
Question: 11.S-tQ.5
Verified Answer:
Using P/E ratios to value companies is a rough rul...
Question: 11.S-tQ.6
Verified Answer:
The DCF valuation method is preferred by academics...
Question: 11.S-tQ.8
Verified Answer:
Possible post-bid defences that you could have des...
Question: 11.S-tQ.10
Verified Answer:
Possible reasons why the shareholders of acquiring...
Question: 11.Qfr.1
Verified Answer:
(a) The major justifications put forward to explai...
Question: 11.Qfr.3
Verified Answer:
Powell’s market value, using its P/E ratio and ear...
Question: 11.Qfr.4
Verified Answer:
There are a large number of factors that will infl...
Question: 11.Qfr.5
Verified Answer:
(a) From the information given the value of the su...