Question 1

Compared with downsizing, __________ has (have)  a more positive effect on firm performance.

Accepted Answer

A)   reconfiguring
B)   downscoping
C)   leveraged buyouts
D)   acquisitionsE) A) and B)
F) All of the above

Question 2

Market power is derived primarily from the:

Accepted Answer

A)   core competencies of the firm.
B)   size of a firm and its resources and capabilities.
C)   quality of a firm's top management team.
D)   depth of a firm's strategy.E) C) and D)
F) All of the above

Question 3

The lower the barriers to entry, the more likely firms will use acquisition as a means to enter a market.

Accepted Answer

A) True 
 B)False

Question 4

A related acquisition involves two firms in the same industry.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

The term "leveraged" in leveraged buyouts refers to the:

Accepted Answer

A)   firm's increased concentration on the firm's core competencies.
B)   amount of new debt incurred in buying the firm.
C)   fact that the employees are purchasing the firm for which they work.
D)   process of removing the firm's stock from public trading.E) B) and C)
F) None of the above

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

Research suggests that horizontal acquisitions of firms with dissimilar characteristics result in higher performance levels.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)   avoid increased government regulation.
B)   achieve greater market power.
C)   exit a hyper-competitive market.
D)   achieve greater financial returns in the short run.E) A) and B)
F) All of the above

Question 10

Research results indicate all of the following EXCEPT:

Accepted Answer

A)   immediately after the announcement of a planned acquisition, the stock price of the majority of acquiring firms declines in the majority of cases.
B)   shareholders of acquired firms often earn above-average returns from an acquisition.
C)   the majority of acquisitions increase long-term value for the acquiring firm.
D)   shareholders of acquiring firms typically earn returns from the transaction that are close to zero.E) A) and B)
F) C) and D)

Question 11

A friendly acquisition:

Accepted Answer

A)   raises the price that has to be paid for a firm.
B)   enhances the complementarity of the two firms' assets.
C)   facilitates the integration of the acquired and acquiring firms.
D)   allows joint ventures to be developed.E) All of the above
F) A) and B)

Question 12

One of the most effective ways to test the feasibility of a future merger or acquisition is for the firms to first engage in a strategic alliance.

Accepted Answer

A) True 
 B)False

Question 13

Without effective due diligence, the:

Accepted Answer

A)   acquiring firm is likely to overpay for an acquisition.
B)   firm may miss its opportunity to buy a well-matched company.
C)   acquisition may deteriorate into a hostile takeover, reducing the value-creating potential of the action.
D)   firm may be unable to act quickly and decisively in purchasing the target firm.E) B) and C)
F) A) and B)

Question 14

Top managers typically become overly focused on acquisitions because only they can perform most of the tasks involved, such as performing due diligence on the target firm.

Accepted Answer

A) True 
 B)False

Question 15

When a firm becomes highly diversified through acquisitions, managers often focus on financial controls rather than strategic controls.

Accepted Answer

A) True 
 B)False

Question 16

In a merger:

Accepted Answer

A)   one firm buys controlling interest in another firm.
B)   two firms agree to integrate their operations on a relatively coequal basis.
C)   two firms combine to create a third separate entity.
D)   one firm breaks into two firms.E) C) and D)
F) None of the above

Question 17

One of the attributes of a successful acquisition is that the acquiring firm conducts effective due diligence to select target firms and evaluate the target firm's health.

Accepted Answer

A) True 
 B)False

Question 18

A manager in your company is proposing the acquisition of Taylor Company, which has developed a new, innovative product, instead of adopting a strategy of developing new products in-house.All of the following arguments are correct EXCEPT:

Accepted Answer

A)   the acquisition of Taylor should be primarily for defensive rather than strategic reasons.
B)   research suggests that acquisition strategies are a common means of avoiding risky internal ventures.
C)   the outcomes of acquisitions can be estimated more easily and accurately than the outcomes for an internal product development process.
D)   acquisitions could become a substitute for innovation within your firm.E) C) and D)
F) B) and C)

Question 19

Firms are more likely to enter a market through acquisition when high product loyalty is present in the industry.

Accepted Answer

A) True 
 B)False

Question 20

Problems associated with acquisitions include all of the following EXCEPT:

Accepted Answer

A)   managers overly focused on acquisitions.
B)   integration difficulties.
C)   large or extraordinary debt.
D)   excessive time spent on the due diligence process.E) None of the above
F) A) and C)

Exam 7: Merger and Acquisition Strategies

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.

Correct AnswerverifiedShow Answer

Market power is derived primarily from the:

Correct AnswerverifiedShow Answer

Problems associated with acquisitions include all of the following EXCEPT:

Correct AnswerverifiedShow Answer

Without effective due diligence, the:

Correct AnswerverifiedShow Answer

A manager in your company is proposing the acquisition of Taylor Company, which has developed a new, innovative product, instead of adopting a strategy of developing new products in-house.All of the following arguments are correct EXCEPT:

Correct AnswerverifiedShow Answer

One of the most effective ways to test the feasibility of a future merger or acquisition is for the firms to first engage in a strategic alliance.

Correct AnswerverifiedShow Answer

Firms are more likely to enter a market through acquisition when high product loyalty is present in the industry.

Correct AnswerverifiedShow Answer

Research suggests that horizontal acquisitions of firms with dissimilar characteristics result in higher performance levels.

Correct AnswerverifiedShow Answer

The lower the barriers to entry, the more likely firms will use acquisition as a means to enter a market.

Correct AnswerverifiedShow Answer

When a firm becomes highly diversified through acquisitions, managers often focus on financial controls rather than strategic controls.

Correct AnswerverifiedShow Answer

Compared with downsizing, __________ has (have) a more positive effect on firm performance.

Correct AnswerverifiedShow Answer

In a merger:

Correct AnswerverifiedShow Answer

Research results indicate all of the following EXCEPT:

Correct AnswerverifiedShow Answer

The term "leveraged" in leveraged buyouts refers to the:

Correct AnswerverifiedShow Answer

One of the attributes of a successful acquisition is that the acquiring firm conducts effective due diligence to select target firms and evaluate the target firm's health.

Correct AnswerverifiedShow Answer

Top managers typically become overly focused on acquisitions because only they can perform most of the tasks involved, such as performing due diligence on the target firm.

Correct AnswerverifiedShow Answer

A related acquisition involves two firms in the same industry.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A friendly acquisition:

Correct AnswerverifiedShow Answer

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