The form of acquisition refers to which of the following:
A. Tax status of the transaction
B. Acquisition vehicle
C. What is being acquired, i.e., stock or assets
D. Form of payment
E. How the transaction will be displayed for financial reporting purposes
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Which of the represent disadvantages of a cash purchase of target stock?
A. Buyer responsible for known and unknown liabilities.
Buyer may avoid need to obtain consents to assignments on contracts.
C. NOLs and tax credits pass to the buyer.
D. No state sales transfer, or use taxes have to be paid.
Enables circumvention of target's board in the event a hostile takeover is initiated.
Which of the following is true of collar arrangements?
A fixed or constant share exchange ratio is one in which the number of acquirer shares exchanged for each target share is unchanged between the signing of the agreement of purchase and sale and closing.
B. Collar agreements provide for certain changes in the exchange ratio contingent on the level of the acquirer’s share price around the effective date of the merger.
C. A fixed exchange collar agreement may involve a fixed exchange ratio as long as the acquirer’s share price remains within a narrow range, calculated as of the effective date of merger.
D. A fixed payment collar agreement guarantees that the target firm shareholder receives a certain dollar value in terms of acquirer stock as long as the acquirer’s stock remains within a narrow range, and a fixed exchange ratio if the acquirer’s average stock price is outside the bounds around the effective date of the merger.
E. All of the above.
Which of the following is not true of mergers?
A. Liabilities and assets transfer automatically
B. May be subject to transfer taxes.
C. No minority shareholders remain.
D. May be time consuming due to need for shareholder approvals.
E. May have to pay dissenting shareholders appraised value of stock
Which of the following are disadvantages of an asset purchase?
Asset write-up
B. May require consents to assignment of contracts
C. Potential for double-taxation of buyer
D. May be subject to sales, use, and transfer taxes
E. B and D
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