17.7

synergy

ComQuest owns the "Innovo" computer program. However, employees are struggling to work the program effectively. North Corp employs some of the state's greatest technology experts. The two companies merge to create NorthQuest. This company will now have cutting edge technology, and the manpower to fully utilize it. This situation is an example of

Caroline should spin-off the dessert branch to another company because this divestiture would allow Plant Based Foods to fully focus on quality snack production.

Plant Based Foods manufactures healthy snacks and desserts. Customer feedback and decreased sales suggest that the company is not succeeding in either area. The CEO, Caroline, decides the company needs to focus on only one area and work to strengthen and develop it. What would be the best way for Caroline to proceed and why?

A merger because this will be beneficial to both companies while also increasing customer satisfaction

Preston Educational Materials sells elementary school supplies. Carter Teaching sells supplies oriented to middle/high school. Feedback from educators and administrators largely centers around one complaint: they do not like having to order from separate companies for elementary and secondary products. Which process would you suggest and why?

merger

Sargent Crop Protection and Nature's Best Seed Company joined forces to provide full service of plant protection to farmers from disease resistant seeds to topical fungicides. The new company Symbio Seeds and Crops can now compete with much larger companies. This is an example of which of the following?

Divestiture aims to narrow a company's focus while buyout is a way of expanding

Which of the following describes the difference between divestiture and buyout?

divestiture and acquisition

Which two processes can be contrasted according to whether assets are sold or purchased?

mergers and acquisitions

Which two processes can be distinguished based upon who dictates the terms of the new arrangement?

Spin-off the supplement and vitamin business as World Health and use the money to upgrade the bottling plants

World Soda owns bottling plants and a nutritional supplement subsidiary in addition to its core business of soda and juice. All the lines are profitable but the supplements and vitamins have significantly different production needs. The bottling plants and vitamin factories need upgrades and the company can't afford both. Which would be the best choice?

Negotiate a merger with Hound Industries to increase market share and realize savings by removing redundancies.

A tightening economy has shrunk profit margins for Beagle Manufacturing which makes a variety of home goods and employs an in-house design team. Their closest competitor, Hound Industries, is a similar size with similar products and is facing similar challenges in the economy. Hound Industries also employees a design team. What would you propose?

Obtain financing to perform a leveraged buyout.

Argon Labs is a profitable research-consulting firm, which regularly pays dividends. However, the significant resources the company devotes to SEC compliance have prevented it from making investments that would lead to innovative technology. Which of the following would be the best option?

sell-off and spin-off

Which two processes are contrasted by assets being sold to an outside buyer versus current shareholders retaining control of assets?

acquisition

Carbonite Industries decides that the addition of Scandium Enterprises will increase their technology base and ability to compete in changing markets. Carbonite is a much larger and more mature firm who will be assuming the debt Scandium has from building the new lab. This is an example of which of the following?

sell-off and spin-off

Which two processes both involve a break-up of company assets?

leveraged buyout

Friendly Foods is a formerly profitable company that has become mired in poor investment choices and inefficiency in recent years. The company's major stakeholders have approached an investment firm to provide it with sufficient capital to revert the company to private status, restructure, and restore profitability. This is an example of a

tender off

In a ________, a buyer offers a price and form of payment to the owners of a targeted company instead of buying shares through a routine stock market transaction.

become a single, stronger company

In a merger, two companies form a new company and

The seller

In a merger, what is the target?

leveraged buyout

In recent years, sales at Sunshine Mart have decreased, stock value has plummeted, and employee turnover rate has been consistently high. Management meets with Double Investments looking for suggestions on how to turn the company around. Double recommends working with investors on buying out shares and becoming private. This situation is an example of a(n)

divestiture

London Hair and Nails specializes in unique nail designs and hair styles. The company uses its own self-created brands of nail polish and hair products. Lately, management has noticed they are unable to keep up with the latest trends for both hair and nails. They decide to focus on nail design and sell the company's hair care line to another company. This situation is an example of

merger

Metro Bus Line and City Bus both run the same routes in Newberg. The companies decide to combine into Metro City Bus in order to provide increased routes, better service, and lower prices. This will in turn increase profitability for both companies. This situation is an example of a

divestiture

Noble Textiles is selling its factories that produce sports uniforms and athletic apparel since changes in the fabric technology make it less compatible with their other lines. The athletic lines will now be a separate company called Noble Sports. This is an example of which of the following?

Divest the parts manufacturing operation

Six years ago, your firm acquired a large parts manufacturer that had been one of your key suppliers. When making the purchase, executives at your firm expected to save significant costs by bringing that production capacity in house. However, no cost savings have been realized to date. What should be proposed?

mergers and spin-offs

Which two processes both result in the formation of a new company?

mergers and acquisitions

Which two processes both work to add value to an existing entity?

tender

Unlike simply buying shares through a routine stock market transaction, a/an _________ offer is a tactic of offering a price and the form of payment to the owners of a targeted company.

A buyout is a means of expansion, whereas a divestiture is a means of narrowing a company's focus.

What is a difference between a buyout and a divestiture?

In a divestiture assets are sold, whereas in in acquisition assets are purchased.

What is a difference between a divestiture and acquisition

Assets are sold to an outside buyer in a sell-off, whereas current shareholders retain control of the assets in a spin-off

What is a difference between a sell-off and spin-off?

who dictates the terms of the new arrangement

What is a key difference between a merger and an acquisition?

Both look to add value to an existing entity

What is a similarity between a merger and an acquisition?

Both involve a break-up of company assets

What is a similarity between a sell-off and spin-off

A company sells some assets

What is the expected result of a divestiture?

A publicly held company becomes privately held

What is the expected result of a leveraged buyout?

The whole is greater than the sum of the parts

What is the meaning of synergy?

synergy

When Xenon Science and Krypton Inc. joined to form Argon Labs, they became the largest research-consulting firm in the country. The scientists have benefited from the combined personnel and equipment resources, which is now allowing them to outcompete major rivals. This is an example of which of the following?