Quiz 17 Corporate strategy - Mergers and acquisitions

A key reason behind Google's decision to acquire the Israeli startup company Waze for $1 billion was to:

preempt its competitors from buying Waze.

Titan Autos Inc. merged with its competitor, Cadvia Autos Inc. This allowed Titan Autos to use its technological competencies along with Cadvia Autos's marketing capabilities to capture a larger market share than what the two entities individually held. What does this scenario best illustrate?

Horizontal integration

Which of the following is a disadvantage of a horizontal integration corporate strategy?

It increases the potential for legal repercussions.

FlyOne Airway's decision to acquire TrueGear Fuels Inc. proved to be ill-fated because its managers had overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airlines industry. What does this scenario best illustrate?

Managerial hubris

Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion in 2012?

The desire to gain a new capability

When does a merger between companies typically occur?

When two firms of comparable size join to form a combined entity

When a large, existing firm buys a startup company, the transaction is generally described as a(n) _____.

acquisition

Google, the leader in online search and advertisement, engaged in a number of smaller acquisitions of tech ventures. It did this in order to:

fill gaps in its competency lineup.

Adidas acquired Reebok primarily to _____.

overcome its competitive disadvantage against Nike

The managers at Movo Automobile Inc. want to diversify their business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition with greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Movo Automobile is most likely a result of:

principal-agent problems.