Deck 4: Merger Strategy

Question 1

Desilas and Levanti found that focus-increasing spinoffs had a more positive impact of shareholder wealth than those spinoffs which increased geographical focus.

Answer 1

True

Question 2

With respect to diversification programs, Berger and Ofek found:

A) Reduced Tobin q values
B) Evidence of higher premiums
C) No significant shareholder wealth effects
D) None of the above

Answer 2

A

Question 3

Haywood and Hambrick found:

A) Horizontal integration yields positive shareholder wealth effects
B) Horizontal deals yield negative shareholder wealth effects
C) Hubris-related deals have higher premiums
D) There is a diversification discount

Answer 3

C

Question 4

Wachovia's acquisition of Golden West Financial provided significant economies of scope which enabled the bank to show steady profits even during the subprime crisis.

Question 5

Both Eckbo and Stillman found:

A) No negative shareholder responses from competitors to horizontal deals
B) Significant negative effects
C) The shareholder wealth effects were delayed and occurred one to two years later
D) None of the above

Question 6

Which motives are often cited as reasons for M&As?

A) Growth
B) Synergy
C) Improved R&D
D) Improved distribution
E) All the above

Question 7

Doukas and Travlos found that, unlike many domestic acquisitions, acquirers enjoyed positive (although not statistically significant) returns when they acquired targets in countries in which they did not previously have operations.

Question 8

Bradley, Desai, and Kim found:

A) Horizontal deals yield greater gains than vertical deals
B) Evidence of the winner's curse
C) Tender offers yield gains for target shareholders
D) Bad bidders make good targets True or False

Question 9

The Merck-Medco deal is an example of related diversification.

Question 10

United Airlines was finally able to realize synergies when they acquired travel-related businesses such as hotels and car rental companies.

Question 11

Schipper and Thompson found positive stock market announcement effects from diversification acquisition programs in the 1960s.

Question 12

Answer: Mitchell and Lehn found that bad bidders are more likely to become takeover targets.

Question 13

Revenue enhancing synergies are more difficult to achieve than cost economies.

Question 14

The process of consolidation of fragmented industries is referred to as:

A) Synergistic deals
B) Roll-ups
C) Vertical integration
D) None of the above

Question 15

Research shows that for companies that often acquire other companies there is:

A) No relationship between size and executive compensation
B) There is a good relationship between size and executive competition
C) Their shares trade at a diversification discount
D) Their acquisition prowess is unrelated to how often they do deals

Question 16

United Airlines' merger with Continental Airlines is an example of:

A) Vertical integration
B) Conglomerate formation
C) Horizontal integration
D) None of the above

Question 17

Improved R&D is a common motive for deals in the airline industry.

Question 18

Markides and Oyon found positive announcement effects for acquisitions by U.S. firms of:

A) Continental European targets
B) British or Canadian target firms
C) South and Central American firms
D) Asian companies

Question 19

Cybo-Ottone and Murgia found positive abnormal returns for European bank merger announcements.

Question 20

Answer: Varaiya found:

A) Higher premiums in horizontal deals
B) Evidence of a winner's curse
C) Related diversification generates positive gains
D) Vertical deals decrease shareholder value