Question

Question:13. Social Dynamo Corporation earned profits last year of \(49 million on sales of \)500 million. During the same period, its major competitor-EIO Corp. - enjoyed sales of \(490 million and earned profits of \)\$ 52\( million. Currently, Social Dynamo is negotiating a deal in which it would acquire the assets of EIO in a transaction Wall Street values at \)120 million. A successful merger between the two companies is expected to raise prices in the market by 2 percent. Is Social Dynamo obligated to notify the U.S. Justice Department and the Federal Trade Commission of its merger intentions? Explain.

Short answer

Answer:

Social Dynamo is obligated to notify DOJ and FTC of its merger intentions because the value of the merger exceeds the value of $70 million.

Step-by-step solution

Profit

Profitis the perk accruing to a businesshouse, firm or entrepreneur due to their risk taking and manufacturing.It is the benefit received for participation in business activities.

Federal trade commission  

According to theHart-Scott-Rodino Antitrust Improvements Act of 1976, parties to an acquisition must inform the DOJ and the FTC of their intention to merge if the transaction's value exceeds themillion thresholds.

As SDC anticipates acquiring the assets of the other company, which are valued at $70 million, it is required to notify the U.S. Justice Department and Federal Trade Commission.