Immense Appetite, Inc., believes that it can acquire Sleepy Industries and improve efficiency to the extent that the market value of Sleepy will increase by $5 million.
Sleepy currently sells for $20 a share, and there are 1 million shares outstanding.
a. Sleepy's management is willing to accept a cash offer of $25 a share. Can the merger be accomplished on a friendly basis?
b. What will happen if Sleepy's management holds out for an offer of $28 a share?