Question 1

Baby Doe's, a designer and manufacturer of children's clothing, has decided to purchase a retail chain specializing in children's clothing.This purchase is a(n):

Accepted Answer

A)  merger. 
B)  unrelated acquisition. 
C)  horizontal acquisition. 
D)  vertical acquisition.

Question 2

The __________ phase is probably the single most important determinant of shareholder value creation in mergers and acquisitions.

Accepted Answer

A)  pre-acquisition negotiations 
B)  pre-acquisition due diligence 
C)  post-acquisition integration. 
D)  post-acquisition restructuring

Question 3

How difficult is it for merger and acquisition strategies to create value, and which firms benefit the most from M&A activity?

Accepted Answer

The answer of How difficult is it for merger and...

Question 4

What is restructuring, and what are its common forms?

Accepted Answer

The answer of What is restructuring, and what are its...

Question 5

In a horizontal acquisition, similarity in characteristics support efforts to integrate the two firms.

Accepted Answer

A) True 
 B)False

Question 6

When a firm is overly dependent on one or more products or markets, and the intensity of rivalry in that market is intense, the firm may wish to __________ by making an acquisition.

Accepted Answer

A)  increase new product speed to market 
B)  broaden its competitive scope 
C)  increase its economies of scale 
D)  overcome entry barriers

Question 7

Managers perceive internal product development as a high-risk activity and tend to choose acquisitions because approximately __________ percent of innovations fail to achieve adequate returns.

Accepted Answer

A)  48 
B)  68 
C)  88 
D)  98

Question 8

Evidence suggests that acquisitions usually lead to favorable financial outcomes, especially for the acquiring firm.

Accepted Answer

A) True 
 B)False

Question 9

One attribute of a successful acquisition is that financing is easier and less costly to obtain

Accepted Answer

A) True 
 B)False

Question 10

It is relatively common for a firm to develop new products internally to diversify its product lines.

Accepted Answer

A) True 
 B)False

Question 11

Downsizing may be necessary because acquisitions often create a situation in which the newly formed firm has duplicate organizational functions such as sales, manufacturing, distribution, and human resources management.

Accepted Answer

A) True 
 B)False

Question 12

Research has shown that approximately what percent of mergers and acquisitions, while not clear failures, produce disappointing results?

Accepted Answer

A)  20 
B)  35 
C)  60 
D)  75

Question 13

Wilberforce Press is a small book publishing firm in Iowa that has been owned by the same family since 1895.It is being purchased by Ozarka Publishing, another family-run business in Nebraska, which has been a specialty publisher for 77 years.Each company is known for its unique culture passed down from its founders.Executives and employees in both firms have "grown up" with their companies.Because both of these companies have a long, stable history in highly related industries, this acquisition has a high probability of success.

Accepted Answer

A) True 
 B)False

Question 14

What is an LBO, and what have been the results of such activities?

Accepted Answer

The answer of What is an LBO, and what have...

Question 15

Downscoping makes management of the firm more effective because it allows the top management team to better understand and manage the remaining businesses.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is false?

Accepted Answer

A)  Synergy resulting from an acquisition generates gains in shareholder wealth beyond what they could achieve through diversification of their own portfolios. 
B)  Private synergy results when the combination of two firms yields competencies and capabilities that could not be achieved by combining with any other firm. 
C)  Private synergy is easy for competitors to understand and imitate. 
D)  Private synergy is more likely when the two firms in an acquisition have complementary assets.

Question 17

Thomas is an upper-middle-level manager for a firm that has been actively involved in acquisitions over the last 10 years.The firm has grown much larger as a result.Thomas has been dismayed to find that recently the managerial culture of the firm has been turning more and more to __________ controls.

Accepted Answer

A)  bureaucratic 
B)  strategic 
C)  tactical 
D)  organic

Question 18

The acquisition of Sun Microsystems (a computer hardware producer) by Oracle Corporation (a software firm) is an example of a(n):

Accepted Answer

A)  vertical acquisition. 
B)  unrelated acquisition. 
C)  horizontal acquisition. 
D)  merger of equals.

Question 19

SpeakEasy, a U.S.software company that specializes in voice-recognition software, wishes to rapidly enter the growing technical translation software market.This market is dominated by firms making highly differentiated products.To enter this market, SpeakEasy would be best served if it considers a(n):

Accepted Answer

A)  vertical acquisition of a firm that uses technical translation products. 
B)  acquisition of a highly related firm in the technical translation market. 
C)  cross-border merger, preferably with an Indian or Chinese company. 
D)  strategy of internally developing the technical translation products needed to compete in this market.

Question 20

BradyHawk found itself in a bidding war and paid a 32 percent premium to acquire LasLuces in 2017 and issued more stock to raise capital This illustrates what problem associated with acquisitions?

Accepted Answer

A)  Integration difficulties 
B)  Inadequate evaluation of the target 
C)  Large or extraordinary debt 
D)  Too much diversification

Exam 7: Merger and Acquisition Strategies

Baby Doe's, a designer and manufacturer of children's clothing, has decided to purchase a retail chain specializing in children's clothing.This purchase is a(n) :

The __________ phase is probably the single most important determinant of shareholder value creation in mergers and acquisitions.

How difficult is it for merger and acquisition strategies to create value, and which firms benefit the most from M&A activity?

What is restructuring, and what are its common forms?

In a horizontal acquisition, similarity in characteristics support efforts to integrate the two firms.

When a firm is overly dependent on one or more products or markets, and the intensity of rivalry in that market is intense, the firm may wish to __________ by making an acquisition.

Managers perceive internal product development as a high-risk activity and tend to choose acquisitions because approximately __________ percent of innovations fail to achieve adequate returns.

Evidence suggests that acquisitions usually lead to favorable financial outcomes, especially for the acquiring firm.

One attribute of a successful acquisition is that financing is easier and less costly to obtain

It is relatively common for a firm to develop new products internally to diversify its product lines.

Downsizing may be necessary because acquisitions often create a situation in which the newly formed firm has duplicate organizational functions such as sales, manufacturing, distribution, and human resources management.

Research has shown that approximately what percent of mergers and acquisitions, while not clear failures, produce disappointing results?

What is an LBO, and what have been the results of such activities?

Downscoping makes management of the firm more effective because it allows the top management team to better understand and manage the remaining businesses.

Which of the following statements is false?

The acquisition of Sun Microsystems (a computer hardware producer) by Oracle Corporation (a software firm) is an example of a(n) :

BradyHawk found itself in a bidding war and paid a 32 percent premium to acquire LasLuces in 2017 and issued more stock to raise capital This illustrates what problem associated with acquisitions?