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

Which of the following best describes the main purpose of merger control regulation by competition authorities?

Merger control exists to test whether a combination would substantially lessen competition in a market. Authorities may then block the deal or require remedies such as asset disposals, rather than protecting target shareholder prices or EPS.

  1. ATo assess whether a combination would substantially lessen competition in a market and, if so, block it or impose remediesCorrect
  2. BTo guarantee that the target's shareholders receive the highest possible price
  3. CTo require the acquirer to pay for the target in cash only
  4. DTo ensure the acquirer's earnings per share rise after the deal

Explanation

Competition authorities examine the effect on market competition, for example through market concentration, and may prohibit a deal or require remedies such as divestments. Price protection for target shareholders is the role of takeover rules, not merger control.

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