Exam 7: Acquisition and Restructuring Strategies

An acquisition occurs when one firm buys a controlling interest in another firm and the acquired firm becomes a subsidiary business.

Compared to internal product development, acquisitions allow

Firms are more likely to enter a market through acquisition when high product loyalty is present in the industry.

____ occur when a single firm creates at least two firms in a nontaxable breakoff creating at least one new equity share offering.

Soon after Daimler Benz acquired Chrysler and became DaimlerChrysler, it became apparent that expected cost savings would not be achieved. One could predict that, as in other failed acquisitions and mergers, the firm would engage in the following EXCEPT

Case Scenario 1: Syco Inc. (SI). Syco, Inc. (SI) was founded the late 1800s and grew through acquisition from being primarily a large discount retailer into a highly diversified firm. Beyond retailing (still SI's dominant business), by the middle of the 1990s its lines of business included significant market positions in insurance, consumer credit cards, stock brokerage, commercial and residential real estate brokerage, and an online Internet portal. Each of the non-retail businesses was average in its relative industry performance. Consistent with the decentralized structure at SI and arms-length corporate oversight, each of these businesses was also rapidly developing their own unique brands and customer following. However, within a short period of time it became apparent that the retail business was failing. SI's vast mall-based department store holdings were suffering from deferred maintenance and merchandising that did not appear to be popular with its once large consumer base. At the same time, highly efficient and focused low-cost competitors like Wal-Mart were beginning to take significant market share from SI. On the verge of bankruptcy by early 2000, SI's management chose to sell off its insurance, real estate and stock brokerage units; it also spun off its credit card and portal businesses in separate public offerings. -Part 1: (Refer to Case Scenario 1) Why do you suppose that SI sold off or spun-off its non-retail businesses? Part 2: What should SI do after selling off the non-retail businesses?

The leadership of apparel maker Liz Claiborne made a number of acquisitions which increased the size of the company from $800 million to $5 billion. The number of brands Claiborne controlled more than doubled, from 16 to 36. However, the acquisitions left Claiborne in a less attractive position, with retailers unwilling to be heavily reliant on one supplier. This situation was the result of

There are few true mergers because

Describe how an acquisition program can result in managerial time and energy absorption.

A friendly acquisition

Top manager participation in and overseeing the activities required for making acquisitions can divert managerial attention from other matters that are necessary for long-term competitive success.

Without effective due diligence the

The factors that lead to poor long-term performance by acquisitions include all of the following EXCEPT firms

Downsizing may be of more ____ value than ____ value.

____ are unsecured obligations that are not tied to specific assets for collateral.

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

Most acquisitions that are designed to achieve greater market power entail buying a competitor, a supplier, a distributor, or a business in a highly related industry.

One of the potential problems associated with acquisitions is that the size of the firm may exceed the economies of scale generated by the acquisition.

____ allows the acquiring firm to keep valuable human resources in the acquired firm from leaving.

The intent of the owners in a whole-firm leveraged buyout may be to increase the efficiency of the bought-out firm and resell it in five to eight years. This tends to make the managers of the bought-out firm high-risk takers, since they will probably not survive the resale and thus have little to lose.