The seller's insistence that the buyer agree to purchase its stock may encourage the buyer to
A. offer a lower purchase price because it is assuming all of the target firm's liabilities
B. offer a higher purchase price because it is assuming all of the target firm's liabilities
C. offer a lower purchase price because it is receiving all of the target's tax benefits
D. use its stock rather than cash to purchase the target firm
E. use cash rather than its stock to purchase the target firm
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The tax status of the transaction may influence the purchase price by
A. Raising the price demanded by the seller to offset potential tax liabilities
B. Reducing the price demanded by the seller to offset potential tax liabilities
Causing the buyer to lower the purchase price if the transaction is taxable to the target firm's shareholders
D. Forcing the seller to agree to defer a portion of the purchase price
E. Forcing the buyer to agree to defer a portion of the purchase price
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
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.
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