BUSI 4940 Exam 3 Questions and Answers Latest Update 2025-2026
Corporate level is concerned with - Answers Diversification
Merger - Answers 2 firms agree to integrate their operations on a relatively co-equal basis to
create another NEW firm
Acquisition - Answers One firm buys a controlling (100% interest) in another firm with the intent
of making the acquired firm a subsidiary business w/in its portfolio (amazon buying whole
foods)
Takeover - Answers Acquisition in which the target firm did not solicit the acquiring firm's bid
for outright ownership
Increased Market Power occurs when: - Answers ability to sell goods above competitive levels,
costs of activities below competitors, a firm's size
Acquisitions intended to increase market power are subject to: - Answers Regulatory review and
analysis by financial markets
Market power is increased by: - Answers Horizontal acquisitions, Vertical Acquisitions, Related
acquisitions
Entry Barriers - Answers factors associated w a company's ability to engage immediate access
in a specific market
Cross-Border Acquisitions - Answers acquisitions made between firms with headquarters in
different countries
Firms acquire (buy) because: - Answers cost of new product development is high, desire an
increased speed to enter product market (FB buying Insta)
Lower risk compared to Developing new products - Answers managers view acquisitions as low
risk, acquisitions discourgae innovation
All diversification can be implemented through acquisitions and ____ risk - Answers mitigate
An acquisition can: (reshaping firm's competitive scope) - Answers reduce negative effect of an
intense rivalry, reduce a firm's dependence
Learning & Develop New capabilities to: - Answers build their own knowledge base, gain
capabilities the firm doesn't already possess
Integration challenges include: - Answers melding two disparate corp cultures, resolve problems
regarding the status of the newly acquired firm's executives
Due Diligence - Answers process of evaluating a target firm for acquisition
, Evaluation requires examining: - Answers Financing of intended transaction, differences in
culture between firms, tax consequences of transactions
Large Amounts of Debt can: - Answers Increase likelihood of bankruptcy, lead to a downgrade
of firm's credit rating, preclude investment in activities that contribute to firm's long-term
success
Synergy - Answers When assets are worth more when used in conjunction with each other than
when they are used separately (1+1=3)
Private Synergy - Answers idea of a perfect match
Too much diversification: - Answers performance drops; curvilinear relationship between
diversification and performance
Managers overly focused on acquisitions: - Answers completing effective due diligence, prep for
negotiations, neglecting strategic role of their job
Acquiring firm becomes too large: - Answers additional costs of controls exceed the benefits,
less innovation
Restructuring - Answers strategy through which a firm changes its set of businesses/financial
structure
Restructuring Strategies: - Answers downsizing, down-scoping, leverage buyouts
Downsizing - Answers reduction in number of a firm's employees
Reasons for downsizing - Answers expect improved profitability from cost reductions, desire for
more efficiency
Downscoping - Answers set of actions causing a firm to refocus on its core business - changes
composition
Leveraged Buyout (LBO) - Answers A party buys all of a firm's assets to make the firm private,
sell assets
Cooperative Strategy - Answers in which two or more firms work together to achieve a shared
objective
Strategic alliance - Answers combine and share and exchange resources to create comp
advantage, involve firms with degree of exchange and sharing of resources and capabilities
Joint Venture - Answers 2 or more firms create a legally independent company by sharing
resources (Hulu-Disney, Fox)
Equity Strategic Alliance - Answers Purchase different percentages of equity in each other
Corporate level is concerned with - Answers Diversification
Merger - Answers 2 firms agree to integrate their operations on a relatively co-equal basis to
create another NEW firm
Acquisition - Answers One firm buys a controlling (100% interest) in another firm with the intent
of making the acquired firm a subsidiary business w/in its portfolio (amazon buying whole
foods)
Takeover - Answers Acquisition in which the target firm did not solicit the acquiring firm's bid
for outright ownership
Increased Market Power occurs when: - Answers ability to sell goods above competitive levels,
costs of activities below competitors, a firm's size
Acquisitions intended to increase market power are subject to: - Answers Regulatory review and
analysis by financial markets
Market power is increased by: - Answers Horizontal acquisitions, Vertical Acquisitions, Related
acquisitions
Entry Barriers - Answers factors associated w a company's ability to engage immediate access
in a specific market
Cross-Border Acquisitions - Answers acquisitions made between firms with headquarters in
different countries
Firms acquire (buy) because: - Answers cost of new product development is high, desire an
increased speed to enter product market (FB buying Insta)
Lower risk compared to Developing new products - Answers managers view acquisitions as low
risk, acquisitions discourgae innovation
All diversification can be implemented through acquisitions and ____ risk - Answers mitigate
An acquisition can: (reshaping firm's competitive scope) - Answers reduce negative effect of an
intense rivalry, reduce a firm's dependence
Learning & Develop New capabilities to: - Answers build their own knowledge base, gain
capabilities the firm doesn't already possess
Integration challenges include: - Answers melding two disparate corp cultures, resolve problems
regarding the status of the newly acquired firm's executives
Due Diligence - Answers process of evaluating a target firm for acquisition
, Evaluation requires examining: - Answers Financing of intended transaction, differences in
culture between firms, tax consequences of transactions
Large Amounts of Debt can: - Answers Increase likelihood of bankruptcy, lead to a downgrade
of firm's credit rating, preclude investment in activities that contribute to firm's long-term
success
Synergy - Answers When assets are worth more when used in conjunction with each other than
when they are used separately (1+1=3)
Private Synergy - Answers idea of a perfect match
Too much diversification: - Answers performance drops; curvilinear relationship between
diversification and performance
Managers overly focused on acquisitions: - Answers completing effective due diligence, prep for
negotiations, neglecting strategic role of their job
Acquiring firm becomes too large: - Answers additional costs of controls exceed the benefits,
less innovation
Restructuring - Answers strategy through which a firm changes its set of businesses/financial
structure
Restructuring Strategies: - Answers downsizing, down-scoping, leverage buyouts
Downsizing - Answers reduction in number of a firm's employees
Reasons for downsizing - Answers expect improved profitability from cost reductions, desire for
more efficiency
Downscoping - Answers set of actions causing a firm to refocus on its core business - changes
composition
Leveraged Buyout (LBO) - Answers A party buys all of a firm's assets to make the firm private,
sell assets
Cooperative Strategy - Answers in which two or more firms work together to achieve a shared
objective
Strategic alliance - Answers combine and share and exchange resources to create comp
advantage, involve firms with degree of exchange and sharing of resources and capabilities
Joint Venture - Answers 2 or more firms create a legally independent company by sharing
resources (Hulu-Disney, Fox)
Equity Strategic Alliance - Answers Purchase different percentages of equity in each other
