4. Taxes and takeover bids In a merger, the acquiring firm can either pay in cash or make a stock offer. The acquirer can purchase the target firm's assets or buy shares directly from the target firm's shareholders. True or False: The structure of the takeover bid (cash versus stock) does not affect the tax status of the target firm's shareholders. False True Merger Tax Effects A takeover bid can be structured in different ways, making it either a taxable or a nontaxable offer. Based on your understanding of the impact of takeover bids on the target and the acquiring firms, answer the following question and then check which statements are correct. The acquirer purchases the target firm's shares with either cash or nonvoting securities, such as debt securities, nonvoting preferred stock, or warrants. This transaction is for the target firm's shareholders. Statements Check all that apply. Target shareholders tender their shares, receive their cash, and pay personal taxes on any realized capital gains. The acquiring firm adds the acquired assets to its books at their appraised fair market values. The purchase will be recorded using the pooling of interests method rather than the purchase method. The acquiring firm adds the acquired assets to its books at their book values. If the acquiring firm makes a partial cash down payment, the transaction is treated as an installment purchase, and the shareholders can spread their tax liability over the acquiring firm's payment period.