Business Activity 2 A,B - Who Are Insiders

Business Question

Activity 2A

Who Are Insiders?

When Does an Insider Trading Violation Occur?

Do Insider Trading Laws Effectively Deter Insider Trading?

How would you describe synergy when it comes to mergers? Provide an example in the course of your discussion.

Requirements:

• There is no minimum or maximum required number of pages. Your analysis will be considered complete, if it addresses each of the 3 components outlined above.

• Use of proper APA formatting and citations. If supporting evidence from outside resources is used those must be properly cited. A minimum of 7 sources (excluding the course textbook) from scholarly articles or business periodicals is required.
• Include your best critical thinking and analysis to arrive at your justification.
• Approach the assignment from the perspective of the senior executive leadership of the company.

Herfindahl–Hirschman Index

Compute the pre-merger HHI for an industry with 10 competitors and the given market shares, how would the HHI change if Companies B and C merged? How would it change if Companies I and J merged instead? Would either set of mergers be likely to evoke an antitrust challenge?

Company A B C D E F G H I J

Market Share (%) 25 20 10 10 10 5 5 5 5 5

Activity 2 B

Quest, Inc., and Dale Solutions, Inc., are negotiating an acquisition of Dale by Quest. The management teams at both companies have tentatively agreed upon a transaction value of about $12.00 per share of Dale Solutions stock but are presently negotiating alternative forms of payment. Gehan, CFA, works for Dale Solutions’ investment team and is evaluating three alternative offers presented by Quest:

Cash Offer: Quest will pay $12.00 per share of Dale stock.

Stock Offer: Quest will give Dale shareholders 0.80 shares of Quest stock per share of Dale stock.

Mixed offer: Quest will pay $6.00 plus 0.40 shares of Quest stock per share of Dale stock.

Gehan estimates that the merger of the two companies will result in economies of scale with a net present value of $90 million. To aid in the analysis, Gehan has also compiled the following data:

Based only on the information given, which of the three offers should Gehan recommend to the Dale Solutions management team?