Which of the following statements is most CORRECT?
A. A defensive merger is one where the firm's managers decide to merge with another firm to avoid or lessen the possibility of being acquired through a hostile takeover.
B. Acquiring firms send a signal that their stock is undervalued if they choose to use stock to pay for the acquisition.
C. Cash payments are used in takeovers but never in mergers.
D. Managers often are fired in takeovers, but never in mergers.
E. If a company that produces military equipment merges with a company that manages a chain of motels, this is an example of a horizontal merger.
Answer: A
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