Final Ch.20 Flashcards Preview

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Flashcards in Final Ch.20 Deck (8)
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two or more companies combined to form a new entity


tax loss carryforward

motive for companies to merge and takes place when one of the firms has previously sustained a tax loss


vertical integration

acquisition of buyers or sellers of goods to the company


horizontal integration

acquisition of competitors


stock for stock exchange

emphasis is laid on earnings per share impact of exchanging securities
- acquiring firm increases its immediate earnings per share as a result of the merger


portfolio effect

overall risk is reduced -> increase in P/E ratio and market value may increase

if there is less risk in a firm, investor may be willing to assign a higher valuation (increasing P/E ratio)


tender offer

involves an attempt by a company to acquire a target firm against its will

An offer to purchase some or all of shareholders' shares in a corporation.


two step buyout

acquiring company attempts to gain control
1. offering a very high price for 51% of the shares outstanding
2. announces a second lower price that will be paid off late