Question : 18.4   Discuss the merger negotiation process, holding companies, and international : 1417819

 

 

18.4   Discuss the merger negotiation process, holding companies, and international mergers.

 

1) A two-tier offer is a tender offer in which the terms offered are more attractive to those who tender shares early.

 

2) A white knight is a takeover defense in which a firm issues securities that give their holders certain rights that become effective when a takeover is attempted and that make the target firm less desirable to a hostile acquirer.

 

 

3) A poison pill is a takeover defense in which a target firm finds an acquirer more to its liking than the initial hostile acquirer and prompts the two to compete to take over the firm.

 

 

4) Greenmail is a takeover defense under which a target firm repurchases a large block of stock at a premium from one or more shareholders in order to end a hostile takeover attempt by those shareholders.

 

 

5) Popular takeover defense methods include white knights, poison pills, greenmail, golden parachutes, and shark repellents.

 

 

6) The owners of a holding company can control significantly larger amounts of assets than they could acquire through mergers.

 

7) Before paying dividends, a subsidiary must pay federal and state taxes on its earnings.

 

 

8) A major disadvantage of holding companies is the increased risk resulting from the leverage effect.

 

 

9) Pyramiding is an arrangement among holding companies wherein one company controls others, thereby causing an even greater magnification of earnings and losses.

 

 

10) The greater the leverage, the smaller the risk involved.