Chapter 7—Merger and Acquisition Strategies
TRUE/FALSE
1. According to the chapter Opening Case, despite recent declines both globally and domestically, M&A
opportunities seem strong in sectors such as energy and health care.
ANS: T PTS: 1 DIF: Medium REF: 187
OBJ: 07-01 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
2. The example in the chapter Opening Case of fuel refiner Valero’s purchase of ethanol producer
VeraSun is an example of a sector in which M&A opportunities exist.
ANS: T PTS: 1 DIF: Easy REF: 187
OBJ: 07-01 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
3. According to the chapter Opening Case, despite the global financial crisis, worldwide M&A activity
grew in 2008 and 2009 primarily due to opportunities in the health acre and energy sectors.
ANS: F PTS: 1 DIF: Hard REF: 187
OBJ: 07-01 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
4. The relatively strong U.S. dollar has increased the interest of firms from other nations to acquire U.S.
companies.
ANS: F PTS: 1 DIF: Hard REF: 188
OBJ: 07-01 TYPE: comprehension
NOT: AACSB: Multicultural and Diversity Understanding | Management: Creation of Value |
Dierdorff & Rubin: Managing strategy & innovation
5. Evidence suggests that acquisitions usually lead to favorable financial outcomes, especially for the
acquiring firm.
ANS: F PTS: 1 DIF: Medium REF: 189
OBJ: 07-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
6. Evidence suggests that returns to shareholders of acquired firms are greater than those for acquiring
firms.
ANS: T PTS: 1 DIF: Medium REF: 189
OBJ: 07-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
, 7. Typical returns on acquisitions for acquiring firms are close to zero.
ANS: T PTS: 1 DIF: Medium REF: 189
OBJ: 07-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
8. A merger is defined as a transaction in which one firm purchases controlling interest in another firm.
ANS: F PTS: 1 DIF: Medium REF: 189
OBJ: 07-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
9. A merger is a strategy through which two firms agree to integrate their operations on a relatively
coequal basis.
ANS: T PTS: 1 DIF: Easy REF: 189
OBJ: 07-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
10. Takeovers are unfriendly acquisitions where the target firm does not solicit the acquiring firm’s bid.
ANS: T PTS: 1 DIF: Easy REF: 189
OBJ: 07-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
11. An acquisition occurs when one firm buys a controlling or 100% interest in another firm and the
acquired firm becomes a subsidiary business.
ANS: T PTS: 1 DIF: Easy REF: 189
OBJ: 07-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
12. Most acquisitions that are designed to achieve greater market power entail buying a competitor, a
supplier, a distributor, or a business in a highly related industry.
ANS: T PTS: 1 DIF: Medium REF: 190
OBJ: 07-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
13. Moon-in-June, a designer and manufacturer of wedding dresses, has decided to purchase a retail chain
specializing in bridal wear. This purchase will be useful in gaining more market power for Moon-in-
June.
ANS: T PTS: 1 DIF: Easy REF: 190
OBJ: 07-02 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
TRUE/FALSE
1. According to the chapter Opening Case, despite recent declines both globally and domestically, M&A
opportunities seem strong in sectors such as energy and health care.
ANS: T PTS: 1 DIF: Medium REF: 187
OBJ: 07-01 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
2. The example in the chapter Opening Case of fuel refiner Valero’s purchase of ethanol producer
VeraSun is an example of a sector in which M&A opportunities exist.
ANS: T PTS: 1 DIF: Easy REF: 187
OBJ: 07-01 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
3. According to the chapter Opening Case, despite the global financial crisis, worldwide M&A activity
grew in 2008 and 2009 primarily due to opportunities in the health acre and energy sectors.
ANS: F PTS: 1 DIF: Hard REF: 187
OBJ: 07-01 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
4. The relatively strong U.S. dollar has increased the interest of firms from other nations to acquire U.S.
companies.
ANS: F PTS: 1 DIF: Hard REF: 188
OBJ: 07-01 TYPE: comprehension
NOT: AACSB: Multicultural and Diversity Understanding | Management: Creation of Value |
Dierdorff & Rubin: Managing strategy & innovation
5. Evidence suggests that acquisitions usually lead to favorable financial outcomes, especially for the
acquiring firm.
ANS: F PTS: 1 DIF: Medium REF: 189
OBJ: 07-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
6. Evidence suggests that returns to shareholders of acquired firms are greater than those for acquiring
firms.
ANS: T PTS: 1 DIF: Medium REF: 189
OBJ: 07-01 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
, 7. Typical returns on acquisitions for acquiring firms are close to zero.
ANS: T PTS: 1 DIF: Medium REF: 189
OBJ: 07-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
8. A merger is defined as a transaction in which one firm purchases controlling interest in another firm.
ANS: F PTS: 1 DIF: Medium REF: 189
OBJ: 07-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
9. A merger is a strategy through which two firms agree to integrate their operations on a relatively
coequal basis.
ANS: T PTS: 1 DIF: Easy REF: 189
OBJ: 07-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
10. Takeovers are unfriendly acquisitions where the target firm does not solicit the acquiring firm’s bid.
ANS: T PTS: 1 DIF: Easy REF: 189
OBJ: 07-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
11. An acquisition occurs when one firm buys a controlling or 100% interest in another firm and the
acquired firm becomes a subsidiary business.
ANS: T PTS: 1 DIF: Easy REF: 189
OBJ: 07-01 TYPE: knowledge
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
12. Most acquisitions that are designed to achieve greater market power entail buying a competitor, a
supplier, a distributor, or a business in a highly related industry.
ANS: T PTS: 1 DIF: Medium REF: 190
OBJ: 07-02 TYPE: comprehension
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff
& Rubin: Managing strategy & innovation
13. Moon-in-June, a designer and manufacturer of wedding dresses, has decided to purchase a retail chain
specializing in bridal wear. This purchase will be useful in gaining more market power for Moon-in-
June.
ANS: T PTS: 1 DIF: Easy REF: 190
OBJ: 07-02 TYPE: application
NOT: AACSB: Business Knowledge & Analytical Skills | Management: Strategy | Dierdorff &
Rubin: Managing strategy & innovation
