Which statement best describes mergers?
A) If a company that produces military equipment merges with a company that manages a chain of motels, this is an example of a horizontal merger.
B) A defensive merger is one where the firm's managers decide to merge with another firm to avoid or lessen the possibility of being acquired through a hostile takeover.
C) Acquiring firms send a signal that their stock is undervalued if they choose to use stock to pay for the acquisition.

Question

Quizplus · Accepted Answer

A defensive merger is when a company merges with another company to avoid being acquired through a hostile takeover. Option A describes a vertical merger, and option C describes a signal theory in acquiring firms.

Which Statement Best Describes Mergers