The shareholders of a target ﬁrm beneﬁt the most when:
A) An acquiring ﬁrm has the better management team and replaces the target ﬁrm's managers.
B) The management of the target ﬁrm is more eﬃcient than the management of the acquiring ﬁrm which replaces them.
C) The management of both the acquiring ﬁrm and the target ﬁrm are as similar as possible.
D) The current management team is kept in place even though the managers of the acquiring ﬁrm are more suited to manage the target ﬁrm's situation.
E) The management team is technologically knowledgeable yet ineffective.

Question

Quizplus · Accepted Answer

When the acquiring firm has a better management team and replaces the target firm's managers, it is likely to improve the financial performance of the target firm, which will benefit the shareholders of the target firm. This is because the acquiring firm's better management team may have access to greater financial resources, operational efficiencies, and synergies that can be leveraged to drive growth and profitability of the target firm.

The Shareholders of a Target ﬁRm Beneﬁt the Most When