Answer to Question #211343 in Management for Bernice maina

Question

Define mergers and acquisition. (2marks)

b) Discuss 10 anti-takeover tactics employed by firms. ( use examples) (10 Marks)

c) What is the role of financial management towards the stability of the Kenyan economy (8 marks). Elaborate

d) Discuss the theories of dividend and how they influence dividend payout in the firm. (10 marks)

Answer 1

Mergers and aqcuisiton is the process of consolidating two companies into one solid unit.

Anti-takeover tactics include:

• Stock repurchase - involves the procurement of the target organization's self-issued shares from the company's shareholders
• Poison pill - a distribution of the right to seize the target's share by the shareholders at a condensed price
• Staggered board - involves the annual re-election of only a third of the organizational board of directors
• Shark repellants -  involves a the necessity of supermajority vote concerning a merger of the target with its majority shareholder. 
• Golden parachutes - involves the reduction of the target's assets where subsequently reducing the purchase price of the organization's hostile acquisition
• Greenmail - involves the process of buying out a target's own shares from the hostile acquirer, resulting in an agreement by the acquirer not to pursue obtaining control of the target in the near future
• Standstill agreement - involves an agreement set up to thwart an acquirer's procurement of the target organization's shares within a specified period of time
• Leveraged recapitalization - involves a series transactions designed to affect the equity and debt structure of a corporation
• Leveraged buyout - involves the target organization's procurement by the management with the use of debt financing, subsequently burdening the organiation with the debt.
• Scorched earth - a self-tender offer by the target that burdens the target with debt.

The role of financial manganement involves:

• constructing an organization's financial reports
• fortifying organizational financial assets
• coming up with strategies and plans for the company's longstanding monetary objectives
• indulging in profitable investment regimes
• the procurement of operational assets within the organization
• generating procedures that ensure the maximizing the value of the firm

The theories of dividend are the:

• Relevance Theory of Dividend; Walter`s model, Gordon`s Model. The theory holds that the current are preferred to impending dividends by shareholders and investors as they are rather uniquely quite rational and are not committed to take risks.
• Irrelevance Theory of Dividend; Modigliani and Miller`s Approach.The theory holds that the dividend policy of a firm is irrelevant as it does not affect the wealth of the shareholders.