Which of the following statements is true of a hostile takeover?
A)A hostile takeover results when management wants the firm to be taken over.
B)A hostile takeover is most likely to occur when a firm's stock is undervalued relative to its potential.
C)After a hostile takeover, managers of the acquired firm generally retain the positions they had prior to the takeover.
D)A hostile takeover does not allow managers to take actions that maximize stock prices.
E)A hostile takeover results in poor management and inefficient operations after the takeover is completed.

Question

Quizplus · Accepted Answer

A hostile takeover is most likely to occur when a firm's stock is undervalued relative to its potential. In a hostile takeover, the acquiring firm attempts to take over the target firm against the wishes of its management. This is usually done when the acquiring firm believes that the target firm is undervalued and has potential for improvement. Managers of the acquired firm may lose their positions after the takeover, and the acquiring firm may take actions to maximize stock prices. The efficiency and success of the acquired firm after the takeover may vary.

Which of the Following Statements Is True of a Hostile