6. CorporateActions

Mergers — Quiz

Test your understanding of mergers with 5 practice questions.

Practice Questions

Question 1

When a merger is structured as a 'statutory merger', what is the legal consequence for the target company?

Question 2

Consider a scenario where Company A acquires Company B. Company B has a net income of $10$ million and $5$ million shares outstanding. Company A has a net income of $50$ million and $20$ million shares outstanding. Company A's stock trades at $40$ per share. If Company A acquires Company B for $200$ million in cash, what is Company A's earnings per share (EPS) immediately after the merger, assuming no synergies and no change in Company A's shares outstanding?

Question 3

Which of the following accounting treatments for mergers is no longer permitted under U.S. GAAP for business combinations initiated after June 30, 2001?

Question 4

In a stock-for-stock merger, if Company X offers to exchange $0.9$ shares of its stock for every $1$ share of Company Y's stock, and Company X's stock is trading at $70$ per share, what is the implied value of Company Y's stock per share?

Question 5

What is the primary motivation for a company to undertake a 'reverse merger'?