Question

1. Alpha company has merged with Beta & Co. Both firms are specialized in manufacturing furniture. After merger, they have reduced their staff from 44,000 to 39,000. What is the main motive for this merger?

1-Achieving economies of scale

2-Achieving economies of vertical integration

3-Using their complementary resources

4-Having an industry consolidation

5-None of the above

2. A poison pill defense is implemented by

1-Giving stock away

2-Selling firm assets

3-Issuing rights at a cheap price

4-Adding seats to the board of directors

5-None of the above

Answer 1

Answer: 3-Using their complementary resources

After merger, the firm reduced employees 44000 to 39000 which implies reducing employees to remove duplicate activities.

Answer: 3-Issuing rights at a cheap price

Poison pill is a defense strategy, when there is a takeover possibilities, then the board of directors of the company to avoid that takeover issue right shares to existing shareholders at a reduced price to dilute the substantial shareholding percentage.