Reading 31: Mergers and Acquisitions-LOS h 习题精选 business, industry, challenge, div, class

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Session 9: Corporate Finance: Financing and Control Issues
Reading 31: Mergers and Acquisitions

LOS h: Calculate the Herfendahl-Hirschman Index and evaluate the likelihood of an antitrust challenge for a given business combination.

 

 

 

There are 6 firms in a given industry, each with an equal market share. Suppose that 2 of the firms decide to merge. Calculate the pre- and post-merger Herfindahl-Hirschman Index, and evaluate the likelihood that the merger will be challenged on antitrust grounds.

A) Pre-merger HHI = 1673; Post-merger HHI = 2224; Possible.

B) Pre-merger HHI = 1673; Post-merger HHI = 2503; Virtually certain.

C) Pre-merger HHI = 1673; Post-merger HHI = 2224; Virtually certain.

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The pre-merger HHI = 1673 = ((16.7 × 16.7 × 6)), the post-merger HHI = 2224 = ((16.7 × 16.7 × 4) + (33.3 × 33.3 × 1)). Given the 551 point change in the index, an antitrust challenge is virtually certain.

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The three broad index value categories for the post-merger competitiveness of an industry, based upon the Herfindahl-Hirschman Index, are:

A) Less than 1000, between 1000 and 2000, and greater than 2000.

B) Less than 900, between 900 and 1800, and greater than 1800.

C) Less than 1000, between 1000 and 1800, and greater than 1800.

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The three broad value categories for the post-merger competitiveness of an industry, based upon the HHI index are less than 1000 (competitive), between 1000 and 1800 (moderately concentrated), and greater than 1800 (highly concentrated).

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There are 12 firms in an industry, 10 of them have a market share of 7% each, and 2 of them have a market share of 15% each. If 2 of the 7% market share firms agree to merge, calculate the pre- and post-merger Herfindahl-Hirschman Index, and evaluate the likelihood that the merger will be challenged on antitrust grounds.

A) Pre-merger HHI = 940; Post-merger HHI = 1038; Unlikely.

B) Pre-merger HHI = 940; Post-merger HHI = 1038; Possible.

C) Pre-merger HHI = 833; Post-merger HHI = 972; Unlikely.

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The pre-merger HHI = 940 = ((7 × 7 × 10) + (15 × 15 × 2)), the post-merger HHI = 1038 = ((7 × 7 × 8) + (14 × 14 × 1) + (15 × 15 × 2)). Since the change is less than 100, a challenge is unlikely.

土豆妮

In the advanced widget industry, there are 10 firms, each with the same market share. Two of the firms are contemplating a merger. What is the likely antitrust action, and which U.S. federal regulatory agency is responsible for taking any action deemed necessary?

A) Certain challenge; Federal Trade Commission.

B) Possible challenge; Federal Trade Commission.

C) Possible challenge; Commerce Department.

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Before the merger, the HHI is 1000. After the proposed merger, the HHI would be 1200. The value and the magnitude of the change indicate that a challenge is possible, but not certain. The Federal Trade Commission, along with the Department of Justice, is responsible for reviewing and approving/challenging proposed mergers.