1．ich of the following statements regarding merger synergies are least accurate?

A)   If estimates regarding the value of the synergies are too high, the target will bear some of the downside.

B)   If estimates regarding the value of the synergies are too low, the target will realize some of the upside.

C)   In a stock offer, all of the risks and potential rewards shift to the target.

D)   The more confident the acquirer is that synergies will be realized, the more likely they will make a cash offer.

2．ich of the following statements regarding a cash offer are least accurate?

A)   If the synergies are less than expected, the acquirer will bear the cost.

B)   If the synergies are greater than expected, the acquirer will benefit.

C)   The target assumes some of the risk regarding the value of the synergies.

D)   The target’s payoff is fixed, regardless of the synergies realized.

3.e theoretical price range for a merger transaction is between the pre-merger price of the target (V_T), and:

A)   V_T + the takeover premium.

B)   V_T + synergies resulting from the merger.

C)   V_T + synergies resulting from the merger – the cash paid to the target.

D)   V_T + synergies resulting from the merger – the takeover premium.

4.ak Industries is considering making a bid for Tidy Trim Makers. The following data applies to the analysis:

If Oak Industries is confident that the merger synergies will be at least $700m or greater, the merger price should be between:

A)   $1,600m and $2,300m and be paid for with stock.

B)   $700m and $2,300m and be paid for with cash.

C)   $700m and $2,300m and be paid for with stock.

D)   $1,600m and $2,300m and be paid for with cash.

答案和详解如下：

1．ich of the following statements regarding merger synergies are least accurate?

A)   If estimates regarding the value of the synergies are too high, the target will bear some of the downside.

B)   If estimates regarding the value of the synergies are too low, the target will realize some of the upside.

C)   In a stock offer, all of the risks and potential rewards shift to the target.

D)   The more confident the acquirer is that synergies will be realized, the more likely they will make a cash offer.

The correct answer was C)

In a stock offer, some of the risks and potential rewards shift to the target. All of the other statements are correct as presented.

2．ich of the following statements regarding a cash offer are least accurate?

A)   If the synergies are less than expected, the acquirer will bear the cost.

B)   If the synergies are greater than expected, the acquirer will benefit.

C)   The target assumes some of the risk regarding the value of the synergies.

D)   The target’s payoff is fixed, regardless of the synergies realized.

The correct answer was C)    

The target’s payoff is fixed, and the acquirer assumes the risk and the reward regarding the value of the synergies.

3.e theoretical price range for a merger transaction is between the pre-merger price of the target (V_T), and:

A)   V_T + the takeover premium.

B)   V_T + synergies resulting from the merger.

C)   V_T + synergies resulting from the merger – the cash paid to the target.

D)   V_T + synergies resulting from the merger – the takeover premium.

The correct answer was B)

Assuming that the true intrinsic values and synergies from the takeover can be correctly estimated, the theoretical price range for a merger transaction is between a low of the pre-merger price of the target (V_T), and a high of V_T + synergies resulting from the merger. At the low, all of the gains from the merger accrue to the acquirer. At the high, all of the gains accrue to the target.

4.ak Industries is considering making a bid for Tidy Trim Makers. The following data applies to the analysis:

< >>	Oak Ind.	< >>	Tidy Trim
Pre-merger stock price	$55	< >>	$80
Number of shares outstanding	$400m	< >>	$20m
Pre-merger market value	$22,000m	< >>	$1,600m
Estimated synergies	< >>	$700m	< >>

If Oak Industries is confident that the merger synergies will be at least $700m or greater, the merger price should be between:

A)   $1,600m and $2,300m and be paid for with stock.

B)   $700m and $2,300m and be paid for with cash.

C)   $700m and $2,300m and be paid for with stock.

D)   $1,600m and $2,300m and be paid for with cash.

The correct answer was D)

The merger price should fall within the range of the pre-merger value of the target ($1,600m) and the pre-merger value plus the estimated synergies ($2,300m). Since the acquirer is confident that the synergies will be $700m or greater, they will most likely seek to pay in cash so that they capture any upside for themselves.