Discussion
Which of the following factors influence the choice between merger and an acquisition of stock?
(I) Shareholders are dealt with directly to bypass target management and board of directors
(II) In a tender offer, usually some minority shareholders do not tender stopping complete firm absorption
(III) Target management may be unfriendly and resist an offer. Resistance usually makes the stock price higher
Answer: D
Correct answer: I, II, and III
All three bear on the choice. A stock acquisition deals with shareholders directly, bypassing a board that may be hostile. It leaves a minority who do not tender, so complete absorption may not be achieved. And resistance by target management, while it may be overcome, usually drives the price up by inviting competing bids and forcing a higher offer.
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