34. Which of the following statements is/are TRUE regarding the sale of companie

Question

34. Which of the following statements is/are TRUE regarding the sale of companies and regarding merger & acquisitions activity? CIRCLE ALL THAT APPLY. (2 points) a. Investment bankers provide services only to firms wishing to make acquisitions; firms being acquired do not require the services of an investment banker and are represented in the transaction negotiations by their corporate attorneys. b· The use ofjunk bond financing enabled companies to raise large amounts of capital, which allowed even rather small companies to acquire much larger companies. A company may wish to sell only a portion of its overall business in order to raise capital to support its remaining business activities. c. d. If a target company does not wish to be acquired but the potential acquirer persists in attempting to take over the target company, the situation is called a hostile takeover e. Investment bankers analyze information about the current market for similar companies in order to determine the appropriate value of a particular target company

Explanation / Answer

Answer a- False. Investment banker provides services both as a seller or a buyer representative and also te corporate lawyers or attorneys' services can be used by both the firms for legal compliance.

Answer b- True as junk bonds are high yielding bonds which offer great risk. But this risk is compensated with the yield that is received. Companies take the advantage of this to raise large amount of money.

Answer c- True. Sometimes companies who wish to raise funds because of their need may sell some part of their business so that funds can be raised and the continuity of the business is not at stake,

Answer d- False. Hostlie takeover refers to a situation where one company ie, the acquirer plans to acquire some company either by going to the shareholder's or fighting or the management's replacement for the approval of such acquisition.

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