Decision-trees are an excellent tool to structure, and deal with uncertainty. Decision trees provide a simple and convenient model to compare alternative decision paths, by quantifying the impact of the uncertainties involved. Decision-trees are typically plotted with a horizontal time-scale moving from left to right. Small squares represent decision-nodes, while small circles denote uncertainty-nodes. Connecting … Continue reading Decision Tree
Question: 1 What is an accretive merger? Answer: The type of merger in which the acquiring company’s earnings per share increase. With regard to P/E ratio, this happens when a company with a higher P/E ratio acquires a company with a lower P/E ratio. The acquiring company’s earnings per share should rise following the merger. … Continue reading Pep. for finance interview.
A merger can be either accretive or dilutive. A merger is accretive when the acquiring company’s earnings per share will increase after the merger. A merger is dilutive when the acquiring company’s earnings will fall after a merger. Let’s take a look at an example. Say a shoe company, Big Gun, wants to acquire a … Continue reading Accretive vs. Dilutive Mergers
The terms merger and acquisition are often used loosely and interchangeably. For example, a bit of tension arose in the Bankers Trust/Deutsche Bank deal when Deutsche Bank officials became irked at Bankers Trust execs’ continual referral to the deal as a merger when it was, in fact, an acquisition. When two companies of relatively equal … Continue reading Mergers vs. Acquisitions
Tender offers are associated with hostile takeovers. In a tender offer, the hostile acquirer renders a tender offer for the public’s stock at a price higher than the current market in an attempt to gather a controlling interest in (majority ownership of) a company. For example, let’s say Mr. T-Bone Pickins wants to take over … Continue reading What is Tender Offers
Bankers and finance officials at companies have a couple of financing options when they consider how to structure a merger: a stock swap or a cash deal. Stock swaps occur more often when there is a strong stock market, because companies with a high market capitalization can acquire companies with that more valuable stock. In … Continue reading Stock Swaps vs. Cash Offers