Question 1

The fact that acquisitions impose substantial costs on acquiring firms (including both the acquisition premium and legal and advisory fees)implies that:

Accepted Answer

A) Acquirers need to be sure that potential of the acquisition to create value exceeds the costs of incurred by the acquisition. 
B) Acquisitions tend to be in the interests of managers but contrary to the interests of shareholders. 
C) Small acquisitions to be preferred to large acquisitions. 
D) Boards of directors should be more active in opposing acquisition proposals.

Question 2

Cross-border acquisitions tend to have the strongest strategic logic,but give rise to the greatest challenges of post-merger integration.

Accepted Answer

A) True 
 B)False

Question 3

Acquisition is the preferred mode of diversification for most firms because:

Accepted Answer

A) The stock market confers with high price/earnings ratios on companies that pursue diversifying acquisitions. 
B) Empirical research shows that diversifying acquisitions typically create significant value for the acquiring firm. 
C) The alternative of acquiring a minority stake does not give the diversifying firms significant decision-making influence over the target firm. 
D) The alternative of setting up a new enterprise in the industry to be entered involves excessive time and risk.

Question 4

Compared to alliances between domestic partners,international alliances typically offer:

Accepted Answer

A) Greater risk without greater potential return. 
B) Higher potential returns but with greater risk of disagreement and failure. 
C) A wider range of possible outcomes dependent upon the compatibility of the national cultures of the partners involves. 
D) Higher potential return and moderate risks so long as the potential for disagreement is recognized and a mechanism is established for arbitrating disputes.

Question 5

The key lesson to be drawn from the failures that Hewlett-Packard has experienced in acquiring software and services companies EDS and Autonomy is that acquisitions that aim to change a company's business model are more risky than acquisitions that seek to leverage the existing business model.

Accepted Answer

A) True 
 B)False

Question 6

Acquiring companies often pay excessive prices to acquire target companies because:

Accepted Answer

A) To gain acceptance of the bid by the majority of a target company's shareholders,acquirers must pay a significant premium over the target company's stock market valuation. 
B) Information asymmetry: acquiring companies knows less about the true value of target companies than do these companies themselves. 
C) Acquirer are often drawn into a competitive bidding wars. 
D) All of these.

Question 7

Mergers,acquisitions,and alliances may be viewed not just as instruments of corporate strategy but as strategies in themselves.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following was not a contributory factor to the success of Disney's post-acquisition integration of Pixar?

Accepted Answer

A) Personal and professional respect among key personnel at the two companies. 
B) Disney's rapid integration of Pixar within its own animated productions unit. 
C) Protection of Pixar's creative culture and employment arrangements. 
D) Maintaining the support of Pixar's president by making him head of Disney's combined animated productions unit.

Question 9

The concentration of Hollywood ﬁlm industry in Los Angeles and electronics and IT companies in Silicon Valley is for different reasons than those which created the industrial districts of Italy.

Accepted Answer

A) True 
 B)False

Question 10

The speed at which many decisions over corporate acquisitions are made as contributed to the disappointing outcomes of most mergers and acquisitions.

Accepted Answer

A) True 
 B)False

Question 11

The continuing popularity of mergers and acquisitions among companies despite the lack of empirical evidence of their benefits suggests:

Accepted Answer

A) Many mergers and acquisitions are motivated by growth rather than profitability 
B) Mergers and acquisitions by the leading firms in an industry promotes imitation by other firms in the industry 
C) Both of these 
D) Neither of these

Question 12

The main reason that empirical evidence of shareholder returns fails to provide conclusive evidence on the performance outcomes of mergers and acquisition is that:

Accepted Answer

A) Stock market data only shows expectations about performance,not actual performance 
B) Stock market data is can only show the impact of M&A announcements and then only over a period of up to 12 months 
C) Both (a)and (b) 
D) Neither (a)nor (b)

Question 13

In Capron and Mitchell's decision framework for selecting the right growth path,if a firm finds that its resources and capabilities do not fit with its current strategy,then acquisition should be first option considered and internal development the last option.

Accepted Answer

A) True 
 B)False

Question 14

The wave of mergers and acquisitions in the beer industry that have created giants such as Anheuser Busch Inbev,SAB Miller and Heineken have been motivated primarily by the desire to:

Accepted Answer

A) Extend geographical scope 
B) Exploit cost savings from combining operations within the same markets 
C) Acquire organizational capabilities 
D) Reduce risk

Question 15

The "lemons problem" in the market for companies refers to the fact that the sellers of companies have better information about the company than do would-be buyers.

Accepted Answer

A) True 
 B)False

Question 16

Internal business venture rather than external mergers,acquisitions and alliances is the preferred means by which most established ﬁrms achieve major extensions in the scope of their activities.

Accepted Answer

A) True 
 B)False

Exam 15: External Growth Strategies: Mergers,acquisitions,and Alliances

The fact that acquisitions impose substantial costs on acquiring firms (including both the acquisition premium and legal and advisory fees) implies that:

Cross-border acquisitions tend to have the strongest strategic logic,but give rise to the greatest challenges of post-merger integration.

Acquisition is the preferred mode of diversification for most firms because:

Compared to alliances between domestic partners,international alliances typically offer:

The key lesson to be drawn from the failures that Hewlett-Packard has experienced in acquiring software and services companies EDS and Autonomy is that acquisitions that aim to change a company's business model are more risky than acquisitions that seek to leverage the existing business model.

Acquiring companies often pay excessive prices to acquire target companies because:

Mergers,acquisitions,and alliances may be viewed not just as instruments of corporate strategy but as strategies in themselves.

Which of the following was not a contributory factor to the success of Disney's post-acquisition integration of Pixar?

The concentration of Hollywood ﬁlm industry in Los Angeles and electronics and IT companies in Silicon Valley is for different reasons than those which created the industrial districts of Italy.

The speed at which many decisions over corporate acquisitions are made as contributed to the disappointing outcomes of most mergers and acquisitions.

The continuing popularity of mergers and acquisitions among companies despite the lack of empirical evidence of their benefits suggests:

The main reason that empirical evidence of shareholder returns fails to provide conclusive evidence on the performance outcomes of mergers and acquisition is that:

In Capron and Mitchell's decision framework for selecting the right growth path,if a firm finds that its resources and capabilities do not fit with its current strategy,then acquisition should be first option considered and internal development the last option.

The wave of mergers and acquisitions in the beer industry that have created giants such as Anheuser Busch Inbev,SAB Miller and Heineken have been motivated primarily by the desire to:

The "lemons problem" in the market for companies refers to the fact that the sellers of companies have better information about the company than do would-be buyers.

Internal business venture rather than external mergers,acquisitions and alliances is the preferred means by which most established ﬁrms achieve major extensions in the scope of their activities.