Exam 7: Merger and Acquisition Strategies

___________ may be necessary because acquisitions create a situation in which the newly formed form has duplicate organizational functions such as sales, manufacturing, distribution, and human resource management.

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 rather than those of the shareholders.

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 be most likely to be secure if:

Each of the following is a rationale for acquisitions EXCEPT:

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:

Researchers have found that shareholders of acquired firms often:

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

Downscoping represents a reduction in the number of a firm's employees and sometimes in the number of its operating units, but it may or may not represent a change in the composition of businesses in the corporation's portfolio.

The quickest and easiest way for a firm to diversify its portfolio of businesses is to make acquisitions.

Acquisitions can become a substitute for innovation in some firms and trigger future rounds of acquisitions.

Moon-in-June, a designer and manufacturer of wedding dresses, has decided to purchase a retail chain specializing in bridal wear. This purchase will be useful in gaining more market power for Moon-in-June.

The announcement that P&G was acquiring premium dog and cat food manufacturer Iams was a _________ acquisition and is intended to ________.

Unrelated diversified firms become overdiversified with a smaller number of business units than do firms using a related diversification strategy.

Hostile acquisitions provide greater financial returns to the acquiring company as it is easier for managers to integrate the firms.

Whole-firm LBOs tend to result in all the following negative outcomes EXCEPT:

Research shows that in times of high or increasing stock prices, due diligence is relaxed and firms often overpay for acquisitions and the long-run performance of the newly formed form suffers.

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

The recent financial crisis made it difficult for firms to complete "megadeals" and the slowdown in merger and acquisition has continued in 2011.

Which of the following is NOT a result of over-diversification?

A horizontal acquisition involves two firms in the same industry.