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.

Question

Quizplus · Accepted Answer

The fact that acquisitions impose substantial costs on acquiring firms means that the acquirers must carefully assess whether the potential benefits of the acquisition are worth the costs. This implies that acquirers need to be sure that the potential of the acquisition to create value exceeds the costs incurred by the acquisition.

The Fact That Acquisitions Impose Substantial Costs on Acquiring Firms