Deck 11: Making Alliances Acquisitions Work

Question 1

While managing alliances,managers should keep in mind that soft-relationship aspects are secondary to strategic and organizational fit.

Answer 1

False

Question 2

The second phase in the dissolution of alliances is going public.

Answer 2

True

Question 3

In a three-stage model of alliance formation,firms need to specify a specific format that is either equity based or contractual (non-equity based)in stage three.

Answer 3

True

Question 4

Strategic alliances are voluntary agreements of cooperation between firms.

Question 5

Inadequate screening is a problem which occurs during the pre-acquisition phase of the merger and acquisitions (M&A)process.

Question 6

In the context of organizing acquisitions,strategic fit refers to the effective matching of complementary strategic capabilities.

Question 7

If a manager is fueled by hubristic motives for acquisition,she may knowingly overpay for targets.

Question 8

_____ are associations between firms that are based on contracts and do not involve the sharing of ownership.

A) Non-equity-based alliances
B) Acquisitions
C) Equity-based alliances
D) Competitive alliances

Question 9

An acquisition is the combination of operations and management of two firms to establish a new legal entity.

Question 10

Relational capabilities are insignificant in making or breaking alliances.

Question 11

Equity,learning and experience,relational capabilities,and organization are the four factors that may influence alliance performance.

Question 12

_____ refers to a business strategy in which each partner in an alliance holds stock in the other firm.

A) Acquisition
B) Strategic investment
C) Cross-shareholding
D) Merger

Question 13

Ocan Foods Inc.,a food and beverage retailer,invests ten percent of its annual revenue in Bright Diaries Inc.,a diary manufacturer.Bright Diaries,on the other hand,invests 15 percent of its annual revenue in Ocan Foods.Which of the following equity-based alliances is shown in the given scenario?

A) Acquisition
B) Contractual alliance
C) Cross-shareholding
D) Merger

Question 14

Antitrust authorities are more likely to approve acquisitions as opposed to alliances.

Question 15

Equity,learning and experience,nationality,and relational capabilities have each been found to have a direct impact on alliance performance.

Question 16

Ziff Tech Inc.,a technological firm,funds Tictoe Corp.,a computer processor designing company,with five percent of its annual revenue.Which of the following best describes the alliance between Ziff Tech and Tictoe Corp.?

A) Acquisition
B) Strategic investment
C) Cross-shareholding
D) Merger

Question 17

_____ are based on ownership or financial interest between firms.

A) Contractual alliances
B) Equity-based alliances
C) Acquisitions
D) Mergers

Question 18

An acquisition is likely to be the largest capital expenditure of a firm,as well as one of its most poorly planned and executed activities.

Question 19

The worst scenario for the dissolution of an alliance can be described as "death by 1000 cuts".

Question 20

If a firm wants to have some direct control over joint activities on a continuing basis,it should choose an equity relationship over a contractual relationship.

Question 21

The alliance between Nilesmith Corp.and Pentrall Inc.is set to dissolve.Both the companies are engaged in extensive negotiations with new alliance partners.Which of the following stages of alliance dissolution is shown in the given scenario?

A) Going public
B) Initiation
C) Uncoupling
D) Aftermath

Question 22

Genra Technologies,a computer manufacturer that specializes in custom-built computers,recently entered into an agreement with Fronton Corp.,a computer hardware manufacturer.According to the agreement,the operations and management control of Fronton Corp.will be transferred to Genra Technologies.In addition,Fronton Corp.will be a unit of Genra Technologies.The given scenario is an example of a(n)_____.

A) strategic investment
B) contractual alliance
C) merger
D) acquisition

Question 23

Firm A has a very laissez-faire culture of dress and work hours,while Firm B is very regulated and strict in those areas.This difference may prove to be a challenge in which aspect of forming an alliance?

A) Strategic fit
B) Organizational fit
C) Relational capability
D) Collaborative capability

Question 24

A(n)_____ is a transfer of the control of operations and management from one firm to another.

A) strategic investment
B) equity-based alliance
C) merger
D) acquisition

Question 25

When two firms combine to establish a new legal entity,it is known as a(n)______.

A) Merger
B) Strategic investment
C) Contractual alliance
D) Acquisition

Question 26

In the context of real options,which of the following is a disadvantage of entering into alliances?

A) Investments are unlikely to be modified.
B) Firms are most likely to choose the wrong partners.
C) Alliances with other firms are most likely to fail.
D) Entering into alliances is very costly.

Question 27

In the three-stage model of alliance formation,which of the following is the first stage?

A) Taking a decision on the mode of growth
B) Making a choice between a contractual and an equity approach
C) Selecting an appropriate format to specify the relationship
D) Taking decisions on strategic and organizational fits

Question 28

In most of the cases,alliances have emerged as great instruments of real options because they help companies to:

A) sequentially scale up or scale down their investments.
B) choose the right partners for future investments.
C) eradicate potential partner opportunism.
D) become immune to competition.

Question 29

A _____ is an investment in real operations as opposed to financial capital.

A) real unit
B) real option
C) real acquisition
D) real expense

Question 30

Which of the following is true of relational capabilities while managing interfirm relationships?

A) They emphasize competition rather than collaboration.
B) They foster potential partner opportunism.
C) They are covered in the traditional business school curriculum.
D) They are rarely found in managers involved in alliances.

Question 31

Informal institutions affect the formation of alliances and acquisitions by:

A) imposing entry mode requirements.
B) centering on collective norms,supported by a normative pillar.
C) involving antitrust authorities to monitor the market.
D) discouraging acquisitions.

Question 32

Which of the following approaches does not allow control over joint activities in an alliance?

A) The joint venture approach
B) The equity approach
C) The contractual approach
D) The cross-shareholding approach

Question 33

The party who begins the process of ending an alliance is labeled the _____.

A) follower
B) partner
C) initiator
D) retractor

Question 34

According to an institution-based view,which of the following is true of synergistic motives that drive acquisitions?

A) They are a response to formal institutional constraints and transitions.
B) They cannot coexist with managerial and hubristic motives.
C) They portray self-interested actions guided by informal norms and values.
D) They portray overconfidence in one's capability.

Question 35

In the context of organizing acquisitions,_____ is the similarity in culture,systems,and structures between two or more firms.

A) strategic fit
B) organizational fit
C) relational capability
D) collaborative capability

Question 36

In the context of acquisition,the only identifiable group of winners is:

A) the shareholders of target firms.
B) the shareholders of acquiring firms.
C) the employees of acquiring firms.
D) the first line managers of target firms.

Question 37

Formal institutions influence alliances and acquisitions by:

A) requiring firms to conform to the entry mode requirements.
B) centering on collective norms,supported by a normative pillar.
C) emphasizing internalized values and beliefs,supported by a cognitive pillar.
D) emphasizing the creation of value.

Question 38

Rues and West Bros.manufactures firearms.Since it lacks the skills and high-end technology needed to manufacture silencers for its firearms,it enters into an alliance with Porben Inc.,a company that specializes in manufacturing silencers.In order to ensure the optimal utilization of Porben's technological capabilities,Rues and West Bros.is most likely to follow the _____ approach.

A) contractual
B) equity
C) turnkey project
D) licensing

Question 39

The wind energy company Cloud Sail and the solar energy company Sun Burst recently formed a new legal entity called Cloud Burst.This action is known as a _____ between the two companies.

A) Contractual alliance
B) Equity based alliance
C) Merger
D) Acquisition

Question 40

A strain between Firm A (an American company)and Firm B (a Saudi Arabian company)was created when Firm B asked the female executives of Firm A to wear headscarves during meetings.Which factor influencing alliance performance is this an example of?

A) Hubristic motivation
B) Strategic planning
C) Relational capacities
D) Nationality

Question 41

In the post-acquisition phase,which of the following problems is specific to cross-border mergers and acquisitions?

A) Nationalistic firm-level concerns over foreign takeovers
B) Nationalistic media-level concerns against foreign takeovers
C) Lack of familiarity with foreign business systems
D) Lack of familiarity with foreign culture

Question 42

Explain how formal institutions affect alliances and acquisitions.

Question 43

Arc Corp.,a consumer goods manufacturer in Lumeria,proposed to merge with Borton Inc.,a consumer goods manufacturer in Arkadas.Arc Corp.cleared the antitrust scrutiny in Lumeria but failed to anticipate a rigorous antitrust scrutiny in Arkadas.As a result,the merger never took place.In this scenario,which of the following is most likely the reason for the failure of the merger?

A) The firms neglected the influence of informal institutions on the merger.
B) The firms neglected the influence of formal institutions on the merger.
C) The firms gave excessive importance to soft relational capabilities.
D) The firms overpaid for their targets.

Question 44

What is the percentage of acquisitions that reportedly fail?

A) 20%
B) 40%
C) 70%
D) 90%

Question 45

Discuss the implications of actions that determine the success and failure in alliances and acquisitions.

Question 46

Discuss the problems that occur in the pre-acquisition and post-acquisition phases of acquisitions.

Question 47

In the context of cross-border mergers and acquisitions (M&As),which of the following statements is true?

A) There are no cultural differences if both sides are from the same continent.
B) They do not involve major problems at the employee level.
C) There are integration difficulties due to clashes of organizational and national cultures.
D) They fail only because of poor strategic fit.

Question 48

Explain the three-stage model in the formations of alliances.

Question 49

Over a period of ten years,Laelle Corp.,a technological firm,has acquired 15 companies.All the acquired companies were high-end technology providers.The company's intention was to leverage superior resources through these acquisitions.In this scenario,Laelle Corp.'s acquisitions are driven by a(n)_____.

A) hubristic motive
B) environmental motive
C) synergistic motive
D) ethical motive

Question 50

In the context of an institution-based view,which of the following is true of managerial motives that drive acquisitions?

A) They are a response to formal rules and regulations.
B) They display herd behavior by chasing fads of acquisitions.
C) They do not benefit a company overall in the long run.
D) They cannot simultaneously coexist with hubristic and synergistic motives.

Question 51

Fly Wagons Inc.and Esca Motors Inc.are competing to acquire Charge Tool Inc.,a spark plug manufacturing company,which is worth $5 million.Esca Motors quotes a bid of $10 million to acquire the company,and Fly Wagons quotes a bid of $20 million.In this scenario,which of the following approaches should be adopted by Fly Wagons for the acquisition?

A) Fly Wagons should submit a bid of $30 million.
B) Fly Wagons should drop the deal.
C) Fly Wagons should continue bidding till Esca Motors gives up on Charge Tool.
D) Fly Wagons should double the bid amount.

Question 52

Discuss four factors that may influence alliance performance.

Question 53

In the context of an institution-based view,which of the following is true of hubristic motives driving acquisitions?

A) They are a response to formal institutional constraints and transitions.
B) They involve the display of herd behavior by chasing fads of acquisitions.
C) They cause a firm to knowingly overpay for targets.
D) They focus on leveraging superior resources.

Question 54

According to the hubristic motive,a winning acquirer may suffer from what is called the ''winner's curse'' when:

A) the market price of target firms do not reflect their intrinsic value.
B) multiple firms are bidding for multiple targets.
C) the winner has overpaid during an acquisition.
D) the winner has not paid the acquisition premium.

Question 55

In the pre-acquisition phase,which of the following must be avoided by an acquirer to reduce the possibility of acquisition failure?

A) Adopting a synergistic view
B) Giving importance to executive hubris
C) Taking actions to eliminate poor organizational fit
D) Addressing stakeholders' concerns

Question 56

Explain the importance of organization in an acquisition.