Exam 4: Merger Strategy

The process of consolidation of fragmented industries is referred to as:

Both Eckbo and Stillman found:

The Merck-Medco deal is an example of related diversification.

With respect to diversification programs, Berger and Ofek found:

Research shows that for companies that often acquire other companies there is:

Desilas and Levanti found that focus-increasing spinoffs had a more positive impact of shareholder wealth than those spinoffs which increased geographical focus.

Answer: Mitchell and Lehn found that bad bidders are more likely to become takeover targets.

Cybo-Ottone and Murgia found positive abnormal returns for European bank merger announcements.

Doukas and Travlos found that, unlike many domestic acquisitions, acquirers enjoyed positive (although not statistically significant) returns when they acquired targets in countries in which they did not previously have operations.

Bradley, Desai, and Kim found:

Schipper and Thompson found positive stock market announcement effects from diversification acquisition programs in the 1960s.

United Airlines' merger with Continental Airlines is an example of:

United Airlines was finally able to realize synergies when they acquired travel-related businesses such as hotels and car rental companies.

Answer: Varaiya found:

Haywood and Hambrick found:

Which motives are often cited as reasons for M&As?

Revenue enhancing synergies are more difficult to achieve than cost economies.

Markides and Oyon found positive announcement effects for acquisitions by U.S. firms of:

Improved R&D is a common motive for deals in the airline industry.

Wachovia's acquisition of Golden West Financial provided significant economies of scope which enabled the bank to show steady profits even during the subprime crisis.