Question 1

Identifying the strategic rationale and likely benefits of mergers and acquisitions is easier in the case of diversifying mergers and acquisitions than for horizontal mergers and acquisitions.

Accepted Answer

A) True 
 B)False

Question 2

The main reason that multinational corporations choose t enter emerging markets by means of a joint venture with a local partner is usually the desire t share risk rather than the need to access local knowledge and distribution channels.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Reckitt Benckiser's multiple acquisitions of consumer products companies has been motivated by its quest for:

Accepted Answer

A) Restructuring opportunities 
B) International diversification 
C) Building a portfolio of consumer brands 
D) Scale economies in production and marketing.

Question 5

The main reason that a strategic alliance is often an attractive alternative to a merger or acquisition is:

Accepted Answer

A) Alliances avoid government restrictions relating to antitrust and foreign direct investment 
B) Alliances permit firms to access one another's resources and capabilities without the costs and risks of a merger or acquisition 
C) Alliances allow a firm to create growth options 
D) Alliances allow risk sharing in giant projects.

Question 6

Strategic alliances are only stable if they are reinforced by equity ownership between the partners.

Accepted Answer

A) True 
 B)False

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

An important lesson from the troubled development of Boeing's 787 Dreamliner is that,for developing complex,technically-advanced products,the hub firm needs to have the capability to manage networks of strategic alliances.

Accepted Answer

A) True 
 B)False

Question 9

Studies that compare post-merger accounting profitability with the pre-merger accounting profitability of the companies involved show little consistency.This is because: it to the companies' performance prior to merging.The problem here is separating
The effects of the merger from the multitude of other factors that influence
Companies' performance over time.returns fails to provide conclusive evidence on the performance outcomes of mergers and acquisition is that:

Accepted Answer

A) The identification problem: it is difficult to distinguish the effects of mergers from the many other factors that influence profitability 
B) The effects of mergers on profitability are diverse 
C) Both (a)and (b) 
D) Neither (a)nor (b)-we do not know why studies of the effects of mergers on firm performance have been s inconclusive

Question 10

The key difference between a merger and an acquisition is that,in the case of a merger,the participating companies combine to create a new company.

Accepted Answer

A) True 
 B)False

Question 11

The tendency for M&A activity is highly cyclical,with a heavy clustering in specific sectors reflects:

Accepted Answer

A) General economic conditions 
B) Changing monetary conditions including interest rates and quantitative easing 
C) Imitative behavior among companies 
D) Excessive liquidity on company balance sheets

Question 12

Mergers and acquisitions go in waves.Because acquirers prefer to pay low prices for acquired companies,these M&A waves tend to be inversely correlated with stock market fluctuations.

Accepted Answer

A) True 
 B)False

Question 13

Acquiring companies typically pay between 20% and 40% more than the pre-bid market capitalization to acquire target companies.The main reason for this sizable acquisition premium is:

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) Excessive optimism causes acquirers to overvalue their acquisition targets 
D) Investment bankers typically mislead the9r clients in their company valuations in an effort to boost their fees

Question 14

For companies that are seeking to augment their own resource and capability base with those of another company,the choice between acquisition and strategic alliance rests primarily upon:

Accepted Answer

A) How close a relationship is necessary in order to gain use f the desired resource of capability 
B) Whether or not the companies are located in different countries 
C) Whether the companies involved are listed or privately held 
D) Whether the desired resource or capability is tradable

Question 15

In the case of cross-border amalgamations of companies,concerns of national domination often mean that mergers are preferred to acquisitions.

Accepted Answer

A) True 
 B)False

Question 16

The forces that gave rise the created the industrial districts of Italy are essentially the same as those that have caused clustering of ﬁlm production companies in Hollywood and electronics and IT companies in Silicon Valley.

Accepted Answer

A) True 
 B)False

Question 17

Issues of pre-acquisition planning and post-acquisition management should be viewed as separate: activities best led by separate teams.

Accepted Answer

A) True 
 B)False

Question 18

Most of the biggest mergers and acquisitions since 2000 have been horizontal-i.e.between companies in the same industry.This reflects the fact that:

Accepted Answer

A) Antitrust authorities have been more concerned with vertical than horizontal mergers and acquisitions 
B) By showing that diversification does not offer significant risk-spreading benefits,modern financial theory has undermined the attractions of diversifying mergers and acquisitions 
C) Horizontal mergers and acquisitions offer the greatest potential for value creation through cost reduction and moderating competition 
D) CEOs favor horizontal mergers and acquisitions because of their desire to eliminate rivals.

Exam 14: External Growth Strategies: Mergers, Acquisitions, and Alliances

Identifying the strategic rationale and likely benefits of mergers and acquisitions is easier in the case of diversifying mergers and acquisitions than for horizontal mergers and acquisitions.

The main reason that multinational corporations choose t enter emerging markets by means of a joint venture with a local partner is usually the desire t share risk rather than the need to access local knowledge and distribution channels.

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

Reckitt Benckiser's multiple acquisitions of consumer products companies has been motivated by its quest for:

The main reason that a strategic alliance is often an attractive alternative to a merger or acquisition is:

Strategic alliances are only stable if they are reinforced by equity ownership between the partners.

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

An important lesson from the troubled development of Boeing's 787 Dreamliner is that,for developing complex,technically-advanced products,the hub firm needs to have the capability to manage networks of strategic alliances.

The key difference between a merger and an acquisition is that,in the case of a merger,the participating companies combine to create a new company.

The tendency for M&A activity is highly cyclical,with a heavy clustering in specific sectors reflects:

Mergers and acquisitions go in waves.Because acquirers prefer to pay low prices for acquired companies,these M&A waves tend to be inversely correlated with stock market fluctuations.

Acquiring companies typically pay between 20% and 40% more than the pre-bid market capitalization to acquire target companies.The main reason for this sizable acquisition premium is:

For companies that are seeking to augment their own resource and capability base with those of another company,the choice between acquisition and strategic alliance rests primarily upon:

In the case of cross-border amalgamations of companies,concerns of national domination often mean that mergers are preferred to acquisitions.

The forces that gave rise the created the industrial districts of Italy are essentially the same as those that have caused clustering of ﬁlm production companies in Hollywood and electronics and IT companies in Silicon Valley.

Issues of pre-acquisition planning and post-acquisition management should be viewed as separate: activities best led by separate teams.

Most of the biggest mergers and acquisitions since 2000 have been horizontal-i.e.between companies in the same industry.This reflects the fact that: