MAN4720 Quiz 7

leveraged buyout

A ___ ___ refers to a restructuring action whereby a party buys all of the assets of a business, financed largely with debt, and takes the firm private

high debt costs, higher risk

A leveraged buyout will often result in a short-term outcome of ___, which, in turn, leads to a long-term outcome of ___

the acquisition of Taylor should be primarily for defensive rather than strategic reasons

A manager in your company is proposing the acquisition of Taylor Company, which has developed a new, innovative product, instead of adopting a strategy of developing new products in-house. All of the following arguments are correct EXCEPT:

only top managers can perform the required due diligence

Acquisitions can take a lot of time for top level managers for all the following reasons EXCEPT:

vertical acquisition

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)

merger

In a ___ two firms agree to integrate their operations on a relatively coequal basis.

restructure

Magma, Inc., acquired Vulcan, Inc., three years ago. Effective integration of the two companies' culture was never achieved, and the two firms' assets were not complementary. It is very likely that Magma will:

88

Managers perceive internal product development as a high-risk activity and tend to choose acquisitions because approximately ___ percent of innovations fail to achieve adequate returns.

60

Research has shown that approximately what percent of mergers and acquisitions, while not clear failures, produce disappointing results?

the majority of acquisitions increase long-term value for the acquiring firm

Research results indicate all of the following EXCEPT - immediately after the announcement of a planned acquisition, the stock price of the majority of acquiring firms declines in the majority of cases - shareholders of acquired firms often earn above-average returns from an acquisition - the majority of acquisitions increase long-term value for the acquiring firm - shareholders of acquiring firms typically earn returns from the transaction that are close to zero

unrelated diversification

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

vertical acquistion

The acquisition of Sun Microsystems (a computer hardware producer) by Oracle Corporation (a software firm) is an example of a(n)

transaction

The expenses incurred by firms trying to create synergy through acquisition are called ___ costs.

broaden its competitive scope

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.

reduce the debt quickly

When substantial debt is used to finance acquisitions, firms with successful acquisitions:

takeover or unfriendly acquistion

When the target firm does not solicit the acquiring firm's bid, it is referred to as a(n):

Private synergy is easy for competitors to understand and imitate

Which of the following statements is false? - Synergy resulting from an acquisition generates gains in shareholder wealth beyond what they could achieve through diversification of their own portfolios - Private synergy results when the combination of two firms yields competencies and capabilities that could not be achieved by combining with any other firm - Private synergy is easy for competitors to understand and imitate - Private synergy is more likely when the two firms in an acquisition have complementary assets.

inefficient operations

Whole-firm LBOs tend to result in all the following negative outcomes EXCEPT:

junk bonds

___ are unsecured obligations that are not tied to specific assets for collateral

downscoping

___ is most often used when the goal is to refocus on the company's business