Question 1

What are the differences between downscoping and downsizing, and why is each used?

Accepted Answer

Downsizing is a reduction in the number

Question 2

The reasons why a firm would overpay for a company that it acquires include inadequate due diligence.

Accepted Answer

A) True 
 B)False

Question 3

Ambrose is a scientist working for a pharmaceutical company.His company was acquired by a rival pharmaceutical company, and now it is involved in downsizing and downscoping.Ambrose is concerned about his job security, since he is actively involved in amateur sports in his community and does not wish to disrupt his current lifestyle.Ambrose's job will MOST likely be secure if:

Accepted Answer

A)  Ambrose's research is in a non-core activity. 
B)  the acquisition has been financed by junk bonds. 
C)  Ambrose is in a position to take a poison pill. 
D)  Ambrose is a key employee in the firm's primary business. 
A)  Ambrose's research is in a non-core activity. 
B)  the acquisition has been financed by junk bonds. 
C)  Ambrose is in a position to take a poison pill. 
D)  Ambrose is a key employee in the firm's primary business.

Question 4

Which of the following is NOT one of the three main restructuring strategies?

Accepted Answer

A)  Realigning 
B)  Downsizing 
C)  Downscoping 
D)  Leveraged buyouts 
A)  Realigning 
B)  Downsizing 
C)  Downscoping 
D)  Leveraged buyouts

Question 5

A merger is a strategy through which two firms agree to integrate their operations on a relatively coequal basis.

Accepted Answer

A) True 
 B)False

Question 6

Cross-border acquisitions are critical to U.S.firms competing internationally:

Accepted Answer

A)  if they are to develop differentiated products for markets served. 
B)  when market share growth is the focus. 
C)  where consolidated operations are beneficial. 
D)  if they wish to overcome entry barriers to international markets. 
A)  if they are to develop differentiated products for markets served. 
B)  when market share growth is the focus. 
C)  where consolidated operations are beneficial. 
D)  if they wish to overcome entry barriers to international markets.

Question 7

Downsizing tends to be of more long-term, or tactical, value than short-term, or strategic, value, making it an optimal restructuring option for managers with a vision for the future.

Accepted Answer

A) True 
 B)False

Question 8

What are the results of the three forms of restructuring?

Accepted Answer

Downsizing usually does not lead to high

Question 9

United Technologies Corp.(UTC) uses acquisitions of firms such as Otis Elevator Company (elevators, escalators, and moving walkways) and Carrier Corporation (heating and air conditioning systems) as the foundation for implementing its related diversification strategy.

Accepted Answer

A) True 
 B)False

Question 10

Private synergies are unique to the acquired and acquiring firms and could not be developed by combining either firm's assets with another company.

Accepted Answer

A) True 
 B)False

Question 11

Due diligence includes all of the following activities EXCEPT assessing:

Accepted Answer

A)  differences in firm cultures. 
B)  tax consequences of the acquisition. 
C)  the level of private synergy between the two firms. 
D)  financing for the intended transaction. 
A)  differences in firm cultures. 
B)  tax consequences of the acquisition. 
C)  the level of private synergy between the two firms. 
D)  financing for the intended transaction.

Question 12

Magma, Inc., acquired Vulcan, Inc., three years ago.Effective integration of the two companies' culture was never achieved, and the two firms' assets were not complementary.It is very likely that Magma will:

Accepted Answer

A)  go public through an IPO. 
B)  review the due diligence information collected before the acquisition. 
C)  restructure. 
D)  review its tactical-level strategies. 
A)  go public through an IPO. 
B)  review the due diligence information collected before the acquisition. 
C)  restructure. 
D)  review its tactical-level strategies.

Question 13

__________ refers to divestiture, spin-off, or some other means of eliminating businesses that are unrelated to a firm's core businesses.

Accepted Answer

A)  Downsizing 
B)  Hostile takeovers 
C)  Shakeouts 
D)  Downscoping 
A)  Downsizing 
B)  Hostile takeovers 
C)  Shakeouts 
D)  Downscoping

Question 14

Compared to internal product development, acquisitions allow:

Accepted Answer

A)  immediate access to innovations in mature product markets. 
B)  more accurate prediction of return on investment. 
C)  slower market entry. 
D)  more effective use of company core competencies. 
A)  immediate access to innovations in mature product markets. 
B)  more accurate prediction of return on investment. 
C)  slower market entry. 
D)  more effective use of company core competencies.

Question 15

An investor is analyzing two firms in the same industry which are basically identical.She is looking for long-term performance from her investment.Both firms are undergoing restructuring.One firm is involved in substantial downsizing, and the other firm is undertaking aggressive downscoping.The investor should invest in the:

Accepted Answer

A)  downscoping firm because the higher debt load will discipline managers to act in shareholders' best interests. 
B)  downscoping firm because this will cause the firm to refocus on its core business. 
C)  downsizing firm because it will be making decisions based on tactical strategies. 
D)  downsizing firm because it is eliminating employees who are essentially "dead weight" and are dragging down the firm's profitability. 
A)  downscoping firm because the higher debt load will discipline managers to act in shareholders' best interests. 
B)  downscoping firm because this will cause the firm to refocus on its core business. 
C)  downsizing firm because it will be making decisions based on tactical strategies. 
D)  downsizing firm because it is eliminating employees who are essentially "dead weight" and are dragging down the firm's profitability.

Question 16

Research has shown that maintaining a low or moderate level of firm debt is critical to the success of an acquisition, even when substantial leverage was used to finance the acquisition itself.

Accepted Answer

A) True 
 B)False

Question 17

What type of buyout is most likely to lead to greater entrepreneurial activity and growth?

Accepted Answer

A)  Management buyout 
B)  Employee buyout 
C)  Related buyout 
D)  Whole-firm buyout 
A)  Management buyout 
B)  Employee buyout 
C)  Related buyout 
D)  Whole-firm buyout

Question 18

When a firm acquires its supplier, it is engaging in a(n):

Accepted Answer

A)  merger. 
B)  unrelated acquisition. 
C)  hostile takeover. 
D)  vertical acquisition. 
A)  merger. 
B)  unrelated acquisition. 
C)  hostile takeover. 
D)  vertical acquisition.

Question 19

Transaction costs resulting from an acquisition refer to the direct and indirect costs resulting from the use of acquisition strategies to create synergies.

Accepted Answer

A) True 
 B)False

Question 20

A(n) __________ occurs when one firm buys a controlling, or 100 percent interest, in another firm.

Accepted Answer

A)  merger 
B)  acquisition 
C)  spin-off 
D)  restructuring 
A)  merger 
B)  acquisition 
C)  spin-off 
D)  restructuring

What are the differences between downscoping and downsizing, and why is each used?

The reasons why a firm would overpay for a company that it acquires include inadequate due diligence.

Which of the following is NOT one of the three main restructuring strategies?

A merger is a strategy through which two firms agree to integrate their operations on a relatively coequal basis.

Cross-border acquisitions are critical to U.S.firms competing internationally:

Downsizing tends to be of more long-term, or tactical, value than short-term, or strategic, value, making it an optimal restructuring option for managers with a vision for the future.

What are the results of the three forms of restructuring?

United Technologies Corp.(UTC) uses acquisitions of firms such as Otis Elevator Company (elevators, escalators, and moving walkways) and Carrier Corporation (heating and air conditioning systems) as the foundation for implementing its related diversification strategy.

Private synergies are unique to the acquired and acquiring firms and could not be developed by combining either firm's assets with another company.

Due diligence includes all of the following activities EXCEPT assessing:

Magma, Inc., acquired Vulcan, Inc., three years ago.Effective integration of the two companies' culture was never achieved, and the two firms' assets were not complementary.It is very likely that Magma will:

__________ refers to divestiture, spin-off, or some other means of eliminating businesses that are unrelated to a firm's core businesses.

Compared to internal product development, acquisitions allow:

Research has shown that maintaining a low or moderate level of firm debt is critical to the success of an acquisition, even when substantial leverage was used to finance the acquisition itself.

What type of buyout is most likely to lead to greater entrepreneurial activity and growth?

When a firm acquires its supplier, it is engaging in a(n):

Transaction costs resulting from an acquisition refer to the direct and indirect costs resulting from the use of acquisition strategies to create synergies.

A(n) __________ occurs when one firm buys a controlling, or 100 percent interest, in another firm.

Strategic Management and Strategic Competitiveness

The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis

The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages

Business-Level Strategy

Competitive Rivalry and Competitive Dynamics

Corporate-Level Strategy

International Strategy

Cooperative Strategy

Corporate Governance

Organizational Structure and Controls

Strategic Leadership

Strategic Entrepreneurship

Filters

Exam 7: Merger and Acquisition Strategies

What are the differences between downscoping and downsizing, and why is each used?

The reasons why a firm would overpay for a company that it acquires include inadequate due diligence.

Which of the following is NOT one of the three main restructuring strategies?

A merger is a strategy through which two firms agree to integrate their operations on a relatively coequal basis.

Cross-border acquisitions are critical to U.S.firms competing internationally:

Downsizing tends to be of more long-term, or tactical, value than short-term, or strategic, value, making it an optimal restructuring option for managers with a vision for the future.

What are the results of the three forms of restructuring?

United Technologies Corp.(UTC) uses acquisitions of firms such as Otis Elevator Company (elevators, escalators, and moving walkways) and Carrier Corporation (heating and air conditioning systems) as the foundation for implementing its related diversification strategy.

Private synergies are unique to the acquired and acquiring firms and could not be developed by combining either firm's assets with another company.

Due diligence includes all of the following activities EXCEPT assessing:

Magma, Inc., acquired Vulcan, Inc., three years ago.Effective integration of the two companies' culture was never achieved, and the two firms' assets were not complementary.It is very likely that Magma will:

__________ refers to divestiture, spin-off, or some other means of eliminating businesses that are unrelated to a firm's core businesses.

Compared to internal product development, acquisitions allow:

Research has shown that maintaining a low or moderate level of firm debt is critical to the success of an acquisition, even when substantial leverage was used to finance the acquisition itself.

What type of buyout is most likely to lead to greater entrepreneurial activity and growth?

When a firm acquires its supplier, it is engaging in a(n):

Transaction costs resulting from an acquisition refer to the direct and indirect costs resulting from the use of acquisition strategies to create synergies.

A(n) __________ occurs when one firm buys a controlling, or 100 percent interest, in another firm.

Strategic Management and Strategic Competitiveness

The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis

The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages

Business-Level Strategy

Competitive Rivalry and Competitive Dynamics

Corporate-Level Strategy

International Strategy

Cooperative Strategy

Corporate Governance

Organizational Structure and Controls

Strategic Leadership

Strategic Entrepreneurship

Filters