Question 1

What is the difference between a business plan and an acquisition plan?

Accepted Answer

The business plan articulates a mission or vision for the firm and a business strategy for realizing that mission for all of the firm's stakeholders. If it is determined following an analysis of available options that an acquisition or merger is necessary to implement the business strategy, a merger/acquisition plan is required. The acquisition plan is a specific type of implementation strategy. The acquisition plan focuses on short-term rather than strategic or longer-term business issues. It consists of management objectives, a resource assessment, a market analysis, management's preferences for managing the process, clearly specified actions, a timetable for completing
the acquisition, and the name of the individual responsible for making it all happen.

Question 2

Do you believe Facebook paid too much for WhatsApp? Why? Why not? Be specific in identifying the assumptions underlying your argument.

Accepted Answer

Based on market value per user, a commonly used valuation metric, Twitter at the time of the announced takeover of WhatsApp was $12.45 per user (i.e., $30 billion/241 million users). This compares to the amount per user paid by Facebook for each WhatsApp user of about $42 ($19 billion/450 million users). Based on this metric, Facebook overpaid for WhatsApp. This assumes that Twitter's users are accurately valued by investors at the moment in time this valuation metric is calculated and that the two firms, WhatsApp and Twitter, exhibit similar expected risk and earnings growth potential. The price paid for each Instagram user by Facebook was about $33 per user. Again, based on this comparison, it would appear that Facebook overpaid.
Those that feel that Facebook did not overpay are assuming that the current frenetic growth in users is sustainable and that this growing user base can be monetized to generate substantial future earnings growth eventually enabling Facebook to earn or exceed its cost of capital. Assuming WhatsApp continues to eschew advertising (whose absence probably stimulates user growth), it is unclear at this point in time how this earnings growth will be achieved. Therefore, the sense that Facebook did not overpay is based more on hope than compelling logic.

Question 3

In your judgment, which of the acquisition plan management preferences discussed in this chapter is the most important
and why?

Accepted Answer

While it is difficult to say that one preference is necessarily more important than another, the criteria that
management indicates should be used for selecting the potential target firms may be among the most important,
because they indicate the general characteristics of the firm that management considers most attractive.

Question 4

Given the nature of technology, do you believe it is possible for one firm to dominant the mobile messaging space? Explain your answer.

Accepted Answer

The answer of Given the nature of technology, do you...

Question 5

Dell Computer is one of the best known global technology companies. In your opinion, who are Dell's primary customers?
Current and potential competitors? Suppliers? How would you assess Dell's bargaining power with respect to its customers
and suppliers? What are Dell's strengths/weaknesses versus it current competitors?

Accepted Answer

The answer of Dell Computer is one of the best...

Question 6

.Discuss the types of analyses inside GE that may have preceded GE's 2008 announcement that it would spin-off its
consumer and industrial business to its shareholders.

Accepted Answer

The answer of .Discuss the types of analyses inside GE...

Question 7

What are the advantages and disadvantages of using an acquisition to implement a business strategy as compared to a joint venture?

Accepted Answer

The answer of What are the advantages and disadvantages of...

Question 8

A business plan articulates a mission or vision for the firm and a strategy for realizing that mission.

Accepted Answer

A business plan should include a clear mission or vision statement and outline the strategies and tactics the firm will use to achieve that mission or vision.

Question 9

A planning-based acquisition process consists of both a business plan and acquisition plan, which drive all subsequent phases of the acquisition process.

Accepted Answer

A planning-based acquisition process does indeed involve both a business plan and an acquisition plan, as these plans guide the entire acquisition process from start to finish.

Question 10

Why is it important to get senior management heavily involved early in the acquisition process?

Accepted Answer

The answer of Why is it important to get senior...

Question 11

Determining where a firm should compete starts with deciding who the firm's current or potential customers are and what are their needs.

Accepted Answer

Determining a firm's target customers and their needs is the first step in deciding where the firm should compete.

Question 12

What alternatives to acquisition did Facebook have in dealing with WhatsApp? Why was acquisition the preferred option?

Accepted Answer

The answer of What alternatives to acquisition did Facebook have...

Question 13

Do you believe that Facebook is justified in its aggressive acquisition strategy? What are the assumptions implicit in this strategy? Are they credible? Why? Why not?

Accepted Answer

The answer of Do you believe that Facebook is justified...

Question 14

How does planning facilitate the acquisition process?

Accepted Answer

The answer of How does planning facilitate the acquisition process?...

Question 15

Ashland Chemical, the largest U.S. chemical distributor, acquired chemical manufacturer, Hercules Inc., for $3.3 billion in

Accepted Answer

The answer of Ashland Chemical, the largest U.S. chemical distributor,...

Question 16

Why is it important to understand the assumptions underlying a business plan or an acquisition plan?

Accepted Answer

The answer of Why is it important to understand the...

Question 17

This move followed Dow Chemical Company's purchase of Rohm & Haas. The justification for both acquisitions was
to diversify earnings and offset higher oil costs. How will these combinations offset escalating oil costs?

Accepted Answer

The answer of This move followed Dow Chemical Company's purchase...

Question 18

After having acquired the OfficeMax superstore chain in 2003, Boise Cascade announced the sale of its core paper and
timber products operations in late 2004 to reduce its dependence on this highly cyclical business. Reflecting its new
emphasis on distribution, the company changed its name to OfficeMax, Inc. How would you describe the OfficeMax
mission and business strategy implicit in these actions.

Accepted Answer

The answer of After having acquired the OfficeMax superstore chain...

Question 19

How might existing Facebook shareholders be hurt by the deal? What do current shareholders have to assume about future earnings growth to benefit from the deal?

Accepted Answer

The answer of How might existing Facebook shareholders be hurt...

Question 20

Describe how Facebook has chosen to deal with cultural differences that may exist between it and the firms it acquires? What are the advantages and disadvantages of Facebook's approach to dealing with cultural differences?

Accepted Answer

The answer of Describe how Facebook has chosen to deal...

Quiz 4: Planning: Developing Business and Acquisition Plans: Phases 1 and 2 of the Acquisition Process