The fact that acquisitions impose substantial costs on acquiring firms (including both the acquisition premium and legal and advisory fees) implies that:
A)Acquirers need to be sure that potential of the acquisition to create value exceeds the costs of incurred by the acquisition
B)Acquisitions tend to be in the interests of managers but contrary to the interests of shareholders
C)Small acquisitions to be preferred to large acquisitions
D)Boards of directors should be more active in opposing acquisition proposals. To instill more effective programs of corporate social responsibility

Question

Quizplus · Accepted Answer

The fact that acquisitions impose substantial costs on acquiring firms implies that acquirers should ensure that the potential benefits of the acquisition outweigh these costs. In other words, they need to be sure that the acquisition will create value for the firm.

The Fact That Acquisitions Impose Substantial Costs on Acquiring Firms