Deck 4: Merger Strategy

Question 1

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

Answer 1

A

Question 2

Revenue enhancing synergies are more difficult to achieve than cost economies

Answer 2

True

Question 3

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.

Answer 3

False

Question 4

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

Question 5

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

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

Question 6

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

Question 7

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

Question 8

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 9

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

Question 10

Vivendi under Meissier is a good example of a hubris-related M&A program.

Question 11

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 12

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

Question 13

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

Question 14

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 15

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

Question 16

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 17

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

Question 18

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

Question 19

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

Question 20

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

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