Identifying agency problems, costs, and resolutionsYou are the CEO of Nelson Corporation, and the current stock price is $27.80. Pollack Enterprises announced today that it intends to buy Nelson Corporation. To obtain all the stock of Nelson Corporation, Pollack Enterprises is willing to pay $38.60 per share. At a meeting with your management, you realize that the management is not happy with the offer and is against the takeover. Therefore, with the full support of your management team, you are fighting to prevent the takeover from Pollack Enterprises.

Question :

Is the management of Nelson Corporation acting in the best interest of the Nelson Corporation stockholders? Explain your reasoning.

A.If the current management team cannot increase the value of the firm beyond the bid price, then the management team is not acting in the interests of the stockholders by fighting the offer.

B.If the management team believes that any other company will actually pay more than $38.60 to acquire the company, then the management team should fight the offer.

C.If the management team believes that it can improve the profitability of the firm and the share price will exceed $38.60, then management should fight the takeover.

D.The current management team often loses its job when another company acquires the company. If the management team is fighting takeovers to protect its job, then the management team is not acting in the interests of the stockholders.