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Fundamentals of Corporate Finance, 4/c/e

Fundamentals of Corporate Finance, 4/e

Stephen A. Ross, Massachusetts Institute of Technology
Randolph W. Westerfield, University of Southern California
Bradford D. Jordan, University of Kentucky
Gordon S. Roberts, York University

Mergers and Acquisitions

Learning Objectives

After studying this chapter in the textbook, you should be able to:

Differentiate between a merger and a consolidation.

List the three key acquisition classifications.

Distinguish between the purchase and pooling methods of accounting for acquisitions.

Define and give an example of the term synergy.

List and discuss the four cash flow benefits associated with mergers and acquisitions.

Explain with an example how an acquisition can lead to the apparent increase in earnings per share.

Explain why diversification is generally not considered to be a good reason for a merger or an acquisition.

Compute the NPV of an acquisition using cash.

Compute the NPV of an acquisition using stock.

Explain why the NPV of a cash acquisition will not be equal to the NPV of a stock acquisition.

Outline the key defensive tactics that companies can use to fend off an unwanted acquisition.

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