Economic Effect Of Significant Transactions Flashcards
What are the 4 types of business combinations a company can enter into to expand its operations?
Horizontal combination
Vertical combination
Circular combination
Diagonal combination
When companies of the same industry producing the same goods join together under single management combine to reduce competition, reduce costs, minimize over production, and gain expertise at various levels of production, what business combination are they forming?
Horizontal combination
When companies at different stages of the production process combine to assure the supply of raw materials o provide a stable market for products sold, what business combination are they forming?
Vertical combination
When different business units with relatively remote connections combine under one management to reduce administrative and operational costs, what business combination are they forming?
Circular combination
When one company integrates with another company that provides ancillary support such as shipping for that company’s primary activity to ensure the ancillary support is completed in a timely manner, what business combination if formed?
Diagonal combination
A company can expand its operations by completing what 4 transactions?
Merger
Acquisition
Tender offer
Purchase of asset
When two or more entities of the same size combine to form a ingle new corporation with the stocks of all merging companies replaced with new stock in the name of the new company, what transaction is occurring?
Merger
When one company buys a smaller company, that smaller company may keep its legal name or be consumed by the purchasing company but the purchasing company is the only company that remains is what type of transaction?
Acquisiton
When a company makes an offer directly to the shareholders of a company to buy their outstanding shares, what transaction is occurring?
Tender offer
When a portion, or all, of the selling company’s assets are purchased by another company which may result in the dissolution of the selling company, what transaction is occurring?
Purchase of assets
A company can partially or fully dispose of a component of a company by performing what 3 divestitures?
Sell off
Spin off
Equity carve out
When a component’s core competencies do not align with the overall company’s, or there is a lack of synergy, a company will complete what divestiture to generate cash and focus on the core business?
Sell off
When a new independent company is formed by separating a subsidiary business from a parent company by issuing stock dividends to shareholders or by offering shareholder stock in the new company in exchange for the parent stock in order for the new independent company to create cash and grow, what divestiture is being completed?
Spin off
When a subsidiary is made public, the sale of shares in the new company generates cash for the parent and the parent has controlling interest, what divestiture is occurring?
Equity carve out
