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Ch 41-2 Mergers & Acquestion

Ch 41-2 Mergers & Acquestion

Q Referring to the previous question in this chapter: a) Why might having Y buy X's assets be a better idea than a merger or consolidation? b) If X's directors do not want to cooperate with the merger or asset acquisition, what can Y's directors attempt to take control of X corp? c) What are some defensive strategies that X directors may employ ? d) If Y is sucessful in the strategy attempted in (b) what type of relationship would X corp and Y Inc have?

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Y buying X’s assets will be a better idea than a merger or consolidation because Goodwill can be booked by Y and goodwill can also be amortized by Y. Moreover, there will be less complications in ensuring that asset are purchased. In case of merger, there is involvement of ensuring that securities laws are complied with. There can be specification made about the liabilities as well as the assets which can be desired to be taken over by Y. However, in case of a merger, there can be unknown liabilities which can create knowledge gaps.