Asked by Melissa Gonzalez on Apr 30, 2024
Verified
The maximum purchase price acceptable to the acquiring firm in a merger:
A) cannot exceed the pre-merger value of the target firm.
B) is always equal to the pre-merger value of the target firm.
C) is always less than the pre-merger value of the target firm.
D) a and c
E) None of the above
Maximum Purchase Price
The highest price a buyer is willing to pay for an asset or property.
Pre-Merger Value
The valuation of a company or asset prior to undergoing a merger or acquisition.
Acquiring Firm
A company that purchases another company in a merger or acquisition to expand its operations or enter new markets.
- Determine elements affecting the premium amount in merger deals.
- Comprehend the principle of generating value via mergers and the methods for its assessment.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
E
Explanation :
The maximum purchase price acceptable to the acquiring firm in a merger can exceed the pre-merger value of the target firm if the acquiring firm believes it can create additional value from the merger through synergies, cost savings, or other strategic benefits. Therefore, none of the given options accurately describe the maximum acceptable purchase price.
Learning Objectives
- Determine elements affecting the premium amount in merger deals.
- Comprehend the principle of generating value via mergers and the methods for its assessment.
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