Question 1

A primary reason for a firm to pursue an acquisition is to

Accepted Answer

A)   avoid increased government regulation.
B)   achieve greater market power.
C)   exit a hyper-competitive market.
D)   achieve greater financial returns in the short run.E) C) and D)
F) A) and B)

Question 2

Each of the following is a rationale for acquisitions EXCEPT

Accepted Answer

A)   achieving greater market power.
B)   overcoming significant barriers to entry.
C)   increasing speed of market entry.
D)   positioning the firm for a tactical competitive move.E) A) and B)
F) A) and C)

Question 3

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 4

Cross-border acquisitions are primarily made to

Accepted Answer

A)   reshape the firm's competitive scope.
B)   reduce the cost of new product development.
C)   take advantage of higher education levels of labor in developed countries.
D)   overcome barriers to entry in another country.E) A) and B)
F) A) and C)

Question 5

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 intended transaction.E) C) and D)
F) All of the above

Question 6

Pappelbon Enterprises recently acquired a chain of convenience stores offering both fuel and food. Pappelbon is now surprised and dismayed to find that the gas pumps have been poorly maintained and will need to be replaced at considerable expense. Each of the following statements accurately reflect this EXCEPT

Accepted Answer

A)   Pappelbon did not fully evaluate the target.
B)   Pappelbon overpaid.
C)   Pappelbon's due diligence was not fully effective.
D)   Pappelbon's management was overly focused on acquisitions.E) A) and B)
F) C) and D)

Question 7

Research has shown that the more ____, the greater is the probability that an acquisition will be successful.

Accepted Answer

A)   related the acquired and acquiring firms are
B)   diverse the resulting portfolio of competencies
C)   disparate the corporate cultures
D)   involved investment banking firms are in the due diligence processE) None of the above
F) C) and D)

Question 8

In the comparison of the acquisition strategies of Chinese versus Indian firms (Chapter 7 Strategic Focus) in the agricultural sector, the Indian firms were more aggressive and likely to take greater risks. In comparison, Chinese firms were more cautious and had very strict payback rules for their acquisitions.

Accepted Answer

A) True 
 B)False

Question 9

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.E) A) and D)
F) A) and C)

Question 10

The fastest and easiest way for a firm to diversity its portfolio of businesses is through acquisition because

Accepted Answer

A)   of barriers to entry in many industries.
B)   it is difficult and time intensive for companies to develop products that differ from their current product line.
C)   innovation in both the acquired and the acquiring firm is enhanced by the exchange of competencies resulting from acquisition.
D)   unrelated acquisitions are usually uncomplicated because the acquired firm is allowed to continue to function independently as it did before acquisition.E) A) and B)
F) A) and C)

Question 11

Traditionally, leveraged buyouts were used as a restructuring strategy to correct managerial mistakes or because the firm's managers were making decisions that primarily served their own interests rtaher than those of the shareholders.

Accepted Answer

A) True 
 B)False

Question 12

The use of high levels of debt in acquisitions has contributed to

Accepted Answer

A)   the increase in above-average returns earned by acquiring firms.
B)   an increased risk of bankruptcy for acquiring firms.
C)   the confidence of the stock market in firms issuing junk bonds.
D)   an increase in investments that have long-term payoffs.E) All of the above
F) None of the above

Question 13

Citigroup's acquisitions and mergers were driven by the concept of a "financial supermarket" (Chapter 7 Strategic Focus) and was a success since very little or restructuring was later required.

Accepted Answer

A) True 
 B)False

Question 14

Restructuring strategies are commonly used to correct or deal with the results of ineffective mergers and acquisitions.

Accepted Answer

A) True 
 B)False

Question 15

According to the Chapter 7 Strategic Focus, research suggests that emerging market firms tend to __________ than other firms and that government ownership of those firms leads to __________ for the acquisition.

Accepted Answer

A)   pay a higher premium; overpayment
B)   pay a lower premium; overpayment
C)   pay a lower premium; underpayment
D)   pay a higher premium; underpaymentE) B) and C)
F) A) and D)

Question 16

Evidence suggests that returns to shareholders of acquired firms are greater than those for acquiring firms.

Accepted Answer

A) True 
 B)False

Question 17

There are few true mergers because

Accepted Answer

A)   few firms have complementary resources.
B)   integration problems are more severe than in outright acquisitions.
C)   one firm usually dominates in terms of market share, size, or value of assets.
D)   of managerial resistance. True mergers result in significant managerial-level layoffs.E) A) and B)
F) A) and C)

Question 18

China remains a challenging environment for investors and political and legal obstacles make acquisitions in China risky and difficult.

Accepted Answer

A) True 
 B)False

Question 19

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 20

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

Exam 7: Merger and Acquisition Strategies

Citigroup's acquisitions and mergers were driven by the concept of a "financial supermarket" (Chapter 7 Strategic Focus) and was a success since very little or restructuring was later required.

Correct Answer
verified

China remains a challenging environment for investors and political and legal obstacles make acquisitions in China risky and difficult.

Correct Answer
verified

The fastest and easiest way for a firm to diversity its portfolio of businesses is through acquisition because

Correct Answer
verified

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

Correct Answer
verified

A primary reason for a firm to pursue an acquisition is to

Correct Answer
verified

There are few true mergers because

Correct Answer
verified

Cross-border acquisitions are primarily made to

Correct Answer
verified

Correct Answer
verified

According to the Chapter 7 Strategic Focus, research suggests that emerging market firms tend to than other firms and that government ownership of those firms leads to for the acquisition.

Correct Answer
verified

Research has shown that the more ____, the greater is the probability that an acquisition will be successful.

Correct Answer
verified

Restructuring strategies are commonly used to correct or deal with the results of ineffective mergers and acquisitions.

Correct Answer
verified

Evidence suggests that returns to shareholders of acquired firms are greater than those for acquiring firms.

Correct Answer
verified

Compared to internal product development, acquisitions allow

Correct Answer
verified

Correct Answer
verified

Traditionally, leveraged buyouts were used as a restructuring strategy to correct managerial mistakes or because the firm's managers were making decisions that primarily served their own interests rtaher than those of the shareholders.

Correct Answer
verified

Each of the following is a rationale for acquisitions EXCEPT

Correct Answer
verified

Due diligence includes all of the following activities EXCEPT assessing

Correct Answer
verified

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.

Correct Answer
verified

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.

Correct Answer
verified

The use of high levels of debt in acquisitions has contributed to

Correct Answer
verified

Exam 7: Merger and Acquisition Strategies

Citigroup's acquisitions and mergers were driven by the concept of a "financial supermarket" (Chapter 7 Strategic Focus) and was a success since very little or restructuring was later required.

Correct AnswerverifiedShow Answer

China remains a challenging environment for investors and political and legal obstacles make acquisitions in China risky and difficult.

Correct AnswerverifiedShow Answer

The fastest and easiest way for a firm to diversity its portfolio of businesses is through acquisition because

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A primary reason for a firm to pursue an acquisition is to

Correct AnswerverifiedShow Answer

There are few true mergers because

Correct AnswerverifiedShow Answer

Cross-border acquisitions are primarily made to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to the Chapter 7 Strategic Focus, research suggests that emerging market firms tend to __________ than other firms and that government ownership of those firms leads to __________ for the acquisition.

Correct AnswerverifiedShow Answer

Research has shown that the more ____, the greater is the probability that an acquisition will be successful.

Correct AnswerverifiedShow Answer

Restructuring strategies are commonly used to correct or deal with the results of ineffective mergers and acquisitions.

Correct AnswerverifiedShow Answer

Evidence suggests that returns to shareholders of acquired firms are greater than those for acquiring firms.

Correct AnswerverifiedShow Answer

Compared to internal product development, acquisitions allow

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Traditionally, leveraged buyouts were used as a restructuring strategy to correct managerial mistakes or because the firm's managers were making decisions that primarily served their own interests rtaher than those of the shareholders.

Correct AnswerverifiedShow Answer

Each of the following is a rationale for acquisitions EXCEPT

Correct AnswerverifiedShow Answer

Due diligence includes all of the following activities EXCEPT assessing

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

The use of high levels of debt in acquisitions has contributed to

Correct AnswerverifiedShow Answer

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verified

According to the Chapter 7 Strategic Focus, research suggests that emerging market firms tend to than other firms and that government ownership of those firms leads to for the acquisition.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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