MAN 4720 EXAM 3 QUESTIONS AND
ANSWERS 100% CORRECT
During the recent financial crisis, M&A activity ______, whereas in 2011, M&A activity
______. - ANSWER-declined; increased
Researchers have found that shareholders of acquired firms often: - ANSWER-earn
above-average returns.
All of the following statements are correct EXCEPT: - ANSWER-the majority of
acquisitions increase long-term value for the acquiring firm.
Claude holds a large number of shares of Bayou Beauty, a regional brewing company
that is considered a likely takeover target by a major international brewer. It would
probably be in Claude's financial interest if Bayou Beauty's owners: - ANSWER-sold the
company to the larger brewer.
In a merger: - ANSWER-two firms agree to integrate their operations on a relatively
coequal basis.
There are few true mergers because: - ANSWER-one firm usually dominates in terms of
market share, size, or value of assets.
A(n) ____ occurs when one firm buys a controlling, or 100 percent interest, in another
firm. - ANSWER-acquisition
When the target firm does not solicit the acquiring firm's bid, it is referred to as a(n): -
ANSWER-takeover or unfriendly acquisition.
Currently, the rationale for making an acquisition includes each of the following
EXCEPT: - ANSWER-to decrease taxes paid by shareholders.
Market power is derived primarily from the: - ANSWER-size of a firm and its resources
and capabilities.
The announcement that P&G was acquiring premium dog and cat food manufacturer
Iams was a _________ acquisition and is intended to ________. - ANSWER-related;
increase speed to market
A primary reason for a firm to pursue an acquisition is to: - ANSWER-achieve greater
market power.
When a firm acquires its supplier, it is engaging in a(n): - ANSWER-vertical acquisition.
,The acquisition of Sun Microsystems (a computer hardware producer) by Oracle
Corporation (a software firm) is an example of a(n): - ANSWER-vertical acquisition
Horizontal, vertical, and related acquisitions to build market power: - ANSWER-are likely
to undergo regulatory review and analysis by financial markets.
Baby Doe's, a designer and manufacturer of children's clothing, has decided to
purchase a retail chain specializing in children's clothing. This purchase is a(n): -
ANSWER-vertical acquisition.
Manny Inc. recently completed the purchase of its primary supplier. Manny intends to
begin expanding the market to which the suppliers' products are sold. This purchase -
ANSWER-vertical acquisition.
Cross-border acquisitions are primarily made to: - ANSWER-overcome barriers to entry
in another country.
The presence of barriers to entry in a particular market will generally make acquisitions
____ as an entry strategy. - ANSWER-more likely
SpeakEasy, a U.S. software company that specializes in voice-recognition software,
wishes to rapidly enter the growing technical translation software market. This market is
dominated by firms making highly differentiated products. To enter this market,
SpeakEasy would be best served if it considers a(an): - ANSWER-acquisition of a highly
related firm in the technical translation market.
Cross-border acquisitions are critical to U.S. firms competing internationally: -
ANSWER-if they wish to overcome entry barriers to international markets.
Managers perceive internal product development as a high-risk activity and tend to
choose acquisitions because approximately _______ percent of innovations are
imitated within 4 years after patents are obtained. - ANSWER-60
Which of the following is NOT a result of over-diversification? - ANSWER-Managers
emphasize strategic controls rather than financial controls.
Acquisitions can become a time sink for top level managers for all the following reasons
EXCEPT: - ANSWER-only top managers can perform the required due diligence.
One problem with becoming too large is that large firms: - ANSWER-usually increase
bureaucratic controls.
Thomas is an upper-middle level manager for a firm that has been actively involved in
acquisitions over the last 10 years. The firm has grown much larger as a result. Thomas
, has been dismayed to find that recently the managerial culture of the firm has been
turning more and more to ____ controls. - ANSWER-bureaucratic
Internal product development is often viewed as: - ANSWER-carrying a high risk of
failure.
A manager in your company is proposing the acquisition of Taylor Company, which has
developed a new, innovative product instead of a strategy of developing new products
in-house. All of the following arguments are correct EXCEPT: - ANSWER-the
acquisition of Taylor should be primarily for defensive rather than strategic reasons.
Entering new markets through acquisitions of companies with new products is not risk-
free, especially if acquisition becomes a substitute for: - ANSWER-innovation.
Compared to internal product development, acquisitions allow: - ANSWER-more
accurate prediction of return on investment.
Research has shown that the more ____, the greater is the probability that an
acquisition will be successful. - ANSWER-related the acquired and acquiring firms are
When a firm is overly dependent on one or more products or markets, and the intensity
of rivalry in that market is intense, the firm may wish to ____ by making an acquisition. -
ANSWER-broaden its competitive scope
The fastest and easiest way for a firm to diversity its portfolio of businesses is through
acquisition because: - ANSWER-it is difficult and time intensive for companies to
develop products that differ from their current product line.
Sales of watches among teenagers and twenty-somethings are declining rapidly as this
age group uses cellphones, iPods, and other devices to tell time. A company that
specializes in selling inexpensive watches to this age group may wish to consider ____
in order to develop new products other than watches. - ANSWER-unrelated
diversification
Each of the following is a rationale for acquisitions EXCEPT: - ANSWER-positioning the
firm for a tactical competitive move.
Research shows that about ____ percent of mergers and acquisitions are successful. -
ANSWER-20
Problems associated with acquisitions include all of the following EXCEPT: - ANSWER-
excessive time spent on the due diligence process.
The factors that lead to poor long-term performance by acquisitions include all of the
following EXCEPT firms: - ANSWER-with insufficient diversification.
ANSWERS 100% CORRECT
During the recent financial crisis, M&A activity ______, whereas in 2011, M&A activity
______. - ANSWER-declined; increased
Researchers have found that shareholders of acquired firms often: - ANSWER-earn
above-average returns.
All of the following statements are correct EXCEPT: - ANSWER-the majority of
acquisitions increase long-term value for the acquiring firm.
Claude holds a large number of shares of Bayou Beauty, a regional brewing company
that is considered a likely takeover target by a major international brewer. It would
probably be in Claude's financial interest if Bayou Beauty's owners: - ANSWER-sold the
company to the larger brewer.
In a merger: - ANSWER-two firms agree to integrate their operations on a relatively
coequal basis.
There are few true mergers because: - ANSWER-one firm usually dominates in terms of
market share, size, or value of assets.
A(n) ____ occurs when one firm buys a controlling, or 100 percent interest, in another
firm. - ANSWER-acquisition
When the target firm does not solicit the acquiring firm's bid, it is referred to as a(n): -
ANSWER-takeover or unfriendly acquisition.
Currently, the rationale for making an acquisition includes each of the following
EXCEPT: - ANSWER-to decrease taxes paid by shareholders.
Market power is derived primarily from the: - ANSWER-size of a firm and its resources
and capabilities.
The announcement that P&G was acquiring premium dog and cat food manufacturer
Iams was a _________ acquisition and is intended to ________. - ANSWER-related;
increase speed to market
A primary reason for a firm to pursue an acquisition is to: - ANSWER-achieve greater
market power.
When a firm acquires its supplier, it is engaging in a(n): - ANSWER-vertical acquisition.
,The acquisition of Sun Microsystems (a computer hardware producer) by Oracle
Corporation (a software firm) is an example of a(n): - ANSWER-vertical acquisition
Horizontal, vertical, and related acquisitions to build market power: - ANSWER-are likely
to undergo regulatory review and analysis by financial markets.
Baby Doe's, a designer and manufacturer of children's clothing, has decided to
purchase a retail chain specializing in children's clothing. This purchase is a(n): -
ANSWER-vertical acquisition.
Manny Inc. recently completed the purchase of its primary supplier. Manny intends to
begin expanding the market to which the suppliers' products are sold. This purchase -
ANSWER-vertical acquisition.
Cross-border acquisitions are primarily made to: - ANSWER-overcome barriers to entry
in another country.
The presence of barriers to entry in a particular market will generally make acquisitions
____ as an entry strategy. - ANSWER-more likely
SpeakEasy, a U.S. software company that specializes in voice-recognition software,
wishes to rapidly enter the growing technical translation software market. This market is
dominated by firms making highly differentiated products. To enter this market,
SpeakEasy would be best served if it considers a(an): - ANSWER-acquisition of a highly
related firm in the technical translation market.
Cross-border acquisitions are critical to U.S. firms competing internationally: -
ANSWER-if they wish to overcome entry barriers to international markets.
Managers perceive internal product development as a high-risk activity and tend to
choose acquisitions because approximately _______ percent of innovations are
imitated within 4 years after patents are obtained. - ANSWER-60
Which of the following is NOT a result of over-diversification? - ANSWER-Managers
emphasize strategic controls rather than financial controls.
Acquisitions can become a time sink for top level managers for all the following reasons
EXCEPT: - ANSWER-only top managers can perform the required due diligence.
One problem with becoming too large is that large firms: - ANSWER-usually increase
bureaucratic controls.
Thomas is an upper-middle level manager for a firm that has been actively involved in
acquisitions over the last 10 years. The firm has grown much larger as a result. Thomas
, has been dismayed to find that recently the managerial culture of the firm has been
turning more and more to ____ controls. - ANSWER-bureaucratic
Internal product development is often viewed as: - ANSWER-carrying a high risk of
failure.
A manager in your company is proposing the acquisition of Taylor Company, which has
developed a new, innovative product instead of a strategy of developing new products
in-house. All of the following arguments are correct EXCEPT: - ANSWER-the
acquisition of Taylor should be primarily for defensive rather than strategic reasons.
Entering new markets through acquisitions of companies with new products is not risk-
free, especially if acquisition becomes a substitute for: - ANSWER-innovation.
Compared to internal product development, acquisitions allow: - ANSWER-more
accurate prediction of return on investment.
Research has shown that the more ____, the greater is the probability that an
acquisition will be successful. - ANSWER-related the acquired and acquiring firms are
When a firm is overly dependent on one or more products or markets, and the intensity
of rivalry in that market is intense, the firm may wish to ____ by making an acquisition. -
ANSWER-broaden its competitive scope
The fastest and easiest way for a firm to diversity its portfolio of businesses is through
acquisition because: - ANSWER-it is difficult and time intensive for companies to
develop products that differ from their current product line.
Sales of watches among teenagers and twenty-somethings are declining rapidly as this
age group uses cellphones, iPods, and other devices to tell time. A company that
specializes in selling inexpensive watches to this age group may wish to consider ____
in order to develop new products other than watches. - ANSWER-unrelated
diversification
Each of the following is a rationale for acquisitions EXCEPT: - ANSWER-positioning the
firm for a tactical competitive move.
Research shows that about ____ percent of mergers and acquisitions are successful. -
ANSWER-20
Problems associated with acquisitions include all of the following EXCEPT: - ANSWER-
excessive time spent on the due diligence process.
The factors that lead to poor long-term performance by acquisitions include all of the
following EXCEPT firms: - ANSWER-with insufficient diversification.
