1. True: If the premium paid by the bidder exceeds the expected additional value to be created through the merger, the bidder's share price is likely to drop on the announcement of the bid. This is because the market may perceive the deal as overpriced, which could negatively impact the bidder's share price.

2. True: Synergies are by far the most common justification that bidders give for the premium they pay for a target. Synergies could be in the form of cost savings, increased market share, or other strategic advantages that the bidder expects to realize from the merger.

3. False: A bidder can often acquire a public-listed company for less than its current market value. This is generally not true as most acquisitions involve a premium over the current market price. This premium is often necessary to incentivize the target company's shareholders to sell their shares.

4. False: Merger activity is greater during economic contractions than during expansions. Typically, merger activity is greater during economic expansions when companies have more resources to pursue acquisitions and are more optimistic about future economic conditions. During economic contractions, companies are more likely to focus on preserving resources and may be less likely to pursue acquisitions.

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1. True: If the premium paid by the bidder exceeds the expected additional value to be created through the merger, the bidder's share price is likely to drop on the announcement of the bid. This is because the market may perceive the deal as overpriced, which could negatively impact the bidder's share price.

2. True: Synergies are by far the most common justification that bidders give for the premium they pay for a target. Synergies could be in the form of cost savings, increased market share, or other strategic advantages that the bidder expects to realize from the merger.

3. False: A bidder can often acquire a public-listed company for less than its current market value. This is generally not true as most acquisitions involve a premium over the current market price. This premium is often necessary to incentivize the target company's shareholders to sell their shares.

4. False: Merger activity is greater during economic contractions than during expansions. Typically, merger activity is greater during economic expansions when companies have more resources to pursue acquisitions and are more optimistic about future economic conditions. During economic contractions, companies are more likely to focus on preserving resources and may be less likely to pursue acquisitions.

Knowee AI · Accepted Answer

1. True: If the premium paid by the bidder exceeds the expected additional value to be created through the merger, the bidder's share price is likely to drop on the announcement of the bid. This is because the market may perceive the deal as overpriced, which could negatively impact the bidder's share price.

2. True: Synergies are by far the most common justification that bidders give for the premium they pay for a target. Synergies could be in the form of cost savings, increased market share, or other strategic advantages that the bidder expects to realize from the merger.

3. False: A bidder can often acquire a public-listed company for less than its current market value. This is generally not true as most acquisitions involve a premium over the current market price. This premium is often necessary to incentivize the target company's shareholders to sell their shares.

4. False: Merger activity is greater during economic contractions than during expansions. Typically, merger activity is greater during economic expansions when companies have more resources to pursue acquisitions and are more optimistic about future economic conditions. During economic contractions, companies are more likely to focus on preserving resources and may be less likely to pursue acquisitions.

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