Asked by Jamie Wilson on May 05, 2024
Verified
Which statement best describes a merger concept?
A) A conglomerate merger is one where a firm combines with another firm in the same industry.
B) Regulations in Canada prohibit acquiring firms from using common shares to purchase another firm.
C) Defensive mergers are designed to make a company less vulnerable to a takeover.
D) The corporate valuation method and the equity residual method, even properly applied, produce different results.
Conglomerate Merger
A conglomerate merger occurs between companies operating in different industries, aimed at diversification and potential synergies.
Defensive Mergers
Defensive mergers are strategic actions taken by companies to fend off hostile takeovers, merge with competitors or acquire businesses in non-related industries to diversify their portfolio and reduce competition.
Corporate Valuation Method
It includes various techniques used to assess the total value of a company, incorporating its financial performance, assets, and market value.
- Recognize the various categories of mergers and the strategic reasons for their occurrence.
- Examine the legal and regulatory environment of mergers and acquisitions.
Verified Answer
ZK
Zybrea KnightMay 05, 2024
Final Answer :
C
Explanation :
The concept of a defensive merger is described as a merger that is designed to make a company less vulnerable to a takeover. Options A and B are incorrect as they provide information about specific types of mergers and regulations in a specific country, respectively. Option D is also incorrect as it provides information about different valuation methods and not about the concept of a merger.
Learning Objectives
- Recognize the various categories of mergers and the strategic reasons for their occurrence.
- Examine the legal and regulatory environment of mergers and acquisitions.