Question 1

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

The answer of The main reason that empirical evidence of...

Question 2

Strategic alliances frequently play an important role in a ﬁrm's internationalization strategy because:

Accepted Answer

Strategic alliances provide internationalizing firms with local knowledge and access to distribution channels that a local partner can provide, which is often lacking in the firms. This helps in overcoming the barrier to entry in a foreign market. A and C are incorrect as alliances do not necessarily offer greater security or share high risks involved in international expansion. Option D is also incorrect as the level of flexibility provided by alliances is debatable and depends on the nature of the partnership.

Question 3

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

Accepted Answer

The rapid integration of Pixar within Disney's own animated productions unit was not a contributory factor to the success of the post-acquisition integration. In fact, it could have potentially caused conflicts and disruptions between the two companies. The other three factors listed (personal and professional respect, protection of culture and employment arrangements, and maintaining support of key personnel) were crucial to the success of the integration.

Question 4

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

Accepted Answer

International alliances often offer higher potential returns due to access to new markets and resources, but they also come with greater risks, including cultural differences and potential disagreements.

Question 5

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

Accepted Answer

Reckitt Benckiser's acquisitions are primarily aimed at building a strong portfolio of consumer brands to enhance its market presence and leverage brand strength.

Question 6

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

Accepted Answer

A strategic alliance allows firms to share resources and capabilities without incurring the costs and risks associated with a full merger or acquisition. It also avoids regulatory hurdles and allows for greater flexibility in the partnership. Additionally, alliances can provide growth options and risk sharing opportunities for large projects.

Question 7

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

Accepted Answer

The fact that acquisitions come with significant costs implies that acquirers need to ensure that the benefits they expect to gain from the acquisition exceed these costs. This is important in ensuring that the acquisition creates value for shareholders. Choice B is not accurate as acquisitions can also be in the interest of shareholders if they create value. Choice C is not necessarily true, as the size of an acquisition depends on the specific circumstances and objectives of the acquiring firm. Choice D is also not accurate as boards of directors should carefully evaluate acquisition proposals and approve or reject them based on their potential to create value for shareholders.

Question 8

In technology-based industries,the most common reason for established companies to acquire small,start-up ﬁrms is in order to:

Accepted Answer

Established companies often acquire small start-up firms in order to acquire capabilities in emerging areas of technology, which they may not have the expertise or resources to develop in-house. This allows them to stay ahead of the competition and remain innovative in their industry.

Question 9

For acquiring ﬁrms,empirical studies show that,on average,the returns to shareholders are:

Accepted Answer

Empirical studies often find that the returns to shareholders of acquiring firms are either negative or not significantly different from zero, indicating that acquisitions do not consistently create value for the shareholders of the acquiring company.

Question 10

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

Accepted Answer

Acquiring companies often pay excessive prices due to a combination of factors: they must offer a premium to entice shareholders (A), they may have less information about the target's true value (B), and they can get caught in competitive bidding wars (C).

Question 11

The transformations of: 
- South African Breweries into SAB Miller,the world's second biggest beer company,
- North Carolina National Bank into Bank of America Corporation,the #2 bank in the US
- Comcast into the world's biggest media company
Are evidence of:

Accepted Answer

These transformations highlight how mergers and acquisitions can rapidly lead to significant strategic changes and growth, as seen in the examples provided.

Question 12

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

The primary motivation for mergers and acquisitions in the beer industry has been to extend geographical scope, allowing companies to access new markets and increase their global presence.

Question 13

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

Accepted Answer

The answer of Acquisition is the preferred mode of diversification...

Question 14

Which are the following statements about pre-merger planning is untrue?

Accepted Answer

In the case of horizontal M&A, it is generally easier to predict the impact on costs due to synergies and efficiencies than the impact on revenues, which can be more uncertain due to market dynamics and competitive responses.

Question 15

What distinguishes a joint venture from other types of strategic alliance is that in a joint venture:

Accepted Answer

A joint venture involves the creation of a new company which is jointly owned by the partners. Therefore, option C is the correct answer. Option A describes a cross shareholding arrangement, while option B describes a merger or acquisition. Option D is not necessarily true as joint ventures can be between partners from the same country as well.

Question 16

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

Accepted Answer

Many mergers and acquisitions are often driven by the desire for growth and market share rather than immediate profitability. Additionally, when leading firms engage in such activities, it can set a trend that other firms in the industry may follow, hoping to achieve similar growth or competitive advantages.

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