The amount paid by an acquirer to the shareholders of the acquired ﬁrm that exceeds the stand- alone value is called the:
A) Green mail.
B) Golden parachute.
C) Goodwill.
D) Poison put.
E) Merger premium.

Question

Quizplus · Accepted Answer

The amount paid by an acquirer to the shareholders of the acquired firm that exceeds the stand-alone value is called the merger premium. This amount represents the value that the acquirer sees in the target firm beyond its tangible assets and earnings potential. Option A, B, C, and D are incorrect because they refer to different concepts: greenmail is a payment by a target firm to a potential acquirer to avoid a hostile takeover, a golden parachute is a compensation package for executives in the event of a merger or acquisition, goodwill is an intangible asset that represents the difference between the value of a company and the value of its assets, and a poison put is a provision that allows bondholders to demand early repayment in the event of a specified event, such as a merger or acquisition.

The Amount Paid by an Acquirer to the Shareholders of the Acquired