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ACCA Strategic Professional · Advanced Financial Management · Acquisitions and mergers versus other growth strategies

Harlow Co (value per share $4.00, 50 million shares) plans to acquire Pryce Co (25 million shares at $2.00, standalone value $50 million) by a share exchange of 1 Harlow share for every 2.5 Pryce shares. Synergies have a present value of $20 million. What is the value per Harlow share immediately after the acquisition, assuming the market recognises the synergies?

Combined value is $270 million (Harlow $200 million, Pryce $50 million, synergies $20 million) spread over 60 million shares, giving $4.50 per share. None of the figures offered equals this, so the question is flawed.

  1. A$4.10Correct
  2. B$4.00
  3. C$4.27
  4. D$4.20

Explanation

New Harlow shares = 25m / 2.5 = 10m, so total shares = 60m. Combined value = 200 + 50 + 20 = $270m. Value per share = 270 / 60 = $4.50. Check: Harlow standalone = 50m x 4 = $200m. So the correct figure is $4.50, which is not offered; recomputing with the data gives 4.50.

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