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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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
Which of the following is a disadvantage of balance sheet adjustments?
A. Protects buyer from eroding values of receivable before closing
B. Audit expense
C. Protects seller from increasing values of receivables before closing
D. Protects from decreasing values of inventories before closing
E. Protects seller from increasing values of inventories before closing
Which of the following are commonly used to close the gap between what the seller wants and what the buyer is willing to pay?
A. Consulting contracts offered to the seller
B. Earn-outs
C. Employment contracts offered to the seller
D. Giving seller rights to license a valuable technology or process
E. All of the above.
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