Final Ch.20 Flashcards Preview

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Flashcards in Final Ch.20 Deck (8)
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1

consolidation

two or more companies combined to form a new entity

2

tax loss carryforward

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

3

vertical integration

acquisition of buyers or sellers of goods to the company

4

horizontal integration

acquisition of competitors

5

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

6

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)

7

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.

8

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