What is the free cash flow theory of mergers? Why do you think that managers might be tempted to pursue size-increasing mergers even when these do not maximize value?
Answer to relevant QuestionsWhat are the costs and benefits of each of the three major organizational forms in the United States? Why do you think the various hybrid forms of business organization have proven so successful? Use the DuPont system to explain why a slower-than-average inventory turnover could cause a firm with an above-average net profit margin and an average degree of financial leverage to have a below-average return on common ...Which industries do you anticipate will experience industry shocks that will spur merger activity in the near future? What is a Herfindahl Index, and what is it meant to measure? Under what conditions would external expansion be preferable to internal expansion? What is the ultimate decision criterion for determining the acceptability of any expansion strategy?
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