Which of the following statements regarding recapitalisation as a takeover defence is FALSE?
A)Restructuring itself can produce efficiency gains, often removing the principal motivation for the takeover in the first place.
B)In many cases, a substantial portion of the synergy gains that an acquirer anticipates from a takeover are savings from a decrease in leverage as well as other cost reductions.
C)Another defence against a takeover is a recapitalisation, in which a company changes its capital structure to make itself less attractive as a target.
D)By increasing leverage on its own, the target firm can reap the benefit of the interest tax shields.

Question

Quizplus · Accepted Answer

The statement in B is false because it suggests that synergy gains from a takeover are primarily from a decrease in leverage and cost reductions, which is misleading. Synergy gains can arise from various sources, not just from reducing leverage or cutting costs. They can also come from increased revenue, access to new markets, improved efficiencies, and other strategic benefits.

Which of the Following Statements Regarding Recapitalisation as a Takeover