1. Examine several recent mergers and suggest the principal motives for merging in each case. 2. Examine a recent merger in which at least part of the payment made to the seller was in the form of...

1. Examine several recent mergers and suggest the principal motives for merging in each case.

2. Examine a recent merger in which at least part of the payment made to the seller was in the form of stock. Use stock market prices to obtain an estimate of the gain from the merger and the cost of the merger.

3. Respond to the following comments.

a. “Our cost of debt is too darn high, but our banks won’t reduce interest rates as long as we’re stuck in this volatile widget-trading business. We’ve got to acquire other companies with safer income streams.”

b. “Merge with Fledgling Electronics? No way! Their P/E’s too high. That deal would knock 20% off our earnings per share.”

c. “Our stock’s at an all-time high. It’s time to make our offer for Digital Organics. Sure, we’ll have to offer a hefty premium to Digital stockholders, but we don’t have to pay in cash. We’ll give them new shares of our stock.”