The Economic Effect of Significant Transactions (B5:M7)

Question 1

horizontal combination

vertical combination

circular combination

diagonal combination

Answer 1

h: two companies in the same industry. Helps achieve economies of scale
v: two companies at different stages in the production process
c: two companies in relatively unrelated industries
d: one company with the primary activity combines with a company that supports primary activity

Question 2

what is a tender offer?

Answer 2

when a company makes the shareholders of another company an offer to buy their stock

Question 3

equity carve-out

spin-off

sell-off

Answer 3

new public company formed, IPO, parent maintains controlling interest

new company which is fully separated from parent. Usually done when a business segment can use a fresh start

outright sale so that company can focus on its core business