Exam 10: Studying Merges and Acquisitions

Many acquisitions fail during the integration stage.

A complementary acquisition increase involves a complementary business.

The resource-based view of competitive advantage says that one reason for acquiring another firm would be to absorb and assimilate the target's real estate holdings.

If the cost of the acquisition exceeds the cost to other firms of accumulating comparable resource stocks, the transferring of resources and capabilities will not create long-term competitive advantage.

During the growth stage of the industry life cycle, acquisitions tend to involve the purchase of start-up firms by well-established firms.

Explain some of the more complex forms of acquisitions.

When a publicly traded firm is acquired by another firm, the purchase price is almost always less than the target firm's market value.

Escalation of commitment can lead to an overestimation of the value believed to be derived from the acquisition.

What are the two possible problems caused by acquisition premiums?

With a roll-up, the acquiring company is trying to maintain the nature of industry competition.

Define acquisition.

When a merger takes place, there is a transfer of ownership.

The purpose of a geographic roll-up is achieving economies of scope and scale.

The tendency of managers to make decisions based on personal self-interest rather than the best interests of shareholders is referred to as ________.

Acquisitions increase the risk associated with entering new markets.

Acquisitions have implications for the financial success of strategies, or in other words the realization of the anticipated ________ of the strategy.

What are some possible negative effects of hubris on acquisitions?

As a firm increases in size, shareholder wealth automatically increases as well.

Primary sources of competitive advantage include resources, knowledge, and capabilities.

Even though the logic behind each form of acquisition varies, the criteria for judging their success are the same.