Benson, Inc., is a publisher of books that it sells to retail bookstores in the United States. Judith Benson, the owner of Benson, Inc., is concerned because its suppliers continue to increase the price of paper and other materials that Benson purchases from them weekly.

One supplier to Benson, Inc., is Hill Company, which provides high-quality supplies but has experienced financial problems recently because of inefficient management. Judith believes that Benson could benefit from merging with Hill Company. She believes that she could acquire (purchase) Hill at a low price because it has performed poorly in the past. She also believes that she could improve Hill's performance by reorganizing its business.

In addition, the merger with Hill would give Benson, Inc., more control over the cost of its supplies. It could obtain supplies from Hill, which would now be part of Benson, Inc. Therefore, it would not be subjected to increased prices by other suppliers. Meanwhile, Hill would not only produce supplies for Benson, Inc., but would also sell them to other customers, as it did in the past.

Questions

1. What type of merger is Judith considering?

2. Explain how Judith might decide on a purchase price for Hill Company.