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An acquiring firm, A, seeks to buy a target firm, T. The acquiring firm has better managers. The value of the target firm, if acquired
An acquiring firm, A, seeks to buy a target firm, T. The acquiring firm has better managers. The value of the target firm, if acquired by A, is $120 million. The value of the target firm under its current management is only $95 million. However, the managers of T can impose a poison pill that would reduce the value of firm T to the acquirer by amount P without providing any benefit to shareholders of T. Assume the poison pill reduces the value of firm T to firm A's and to firm T's shareholders by the same amount. The minimum value of P that would prevent A from acquiring T is P2$ 120 million. (Enter your response rounded to the nearest whole number.) What is the cost of this poison pill to shareholders of the two firms? The cost to shareholders of firm A and to shareholders of firm T combined is $ 25 million
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