Management Quiz 5
Research has shown that approximately what percent of mergers and acquisitions, while not clear failures, produce disappointing results?
60
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.
88
Ambrose is a scientist working for a pharmaceutical company. His company was acquired by a rival pharmaceutical company, and now it is involved in downsizing and downscoping. Ambrose is concerned about his job security, since he is actively involved in amateur sports in his community and does not wish to disrupt his current lifestyle. Ambrose's job will MOST likely be secure if:
Ambrose is a key employee in the firm's primary business.
__________ are unsecured obligations that are not tied to specific assets for collateral
Junk bonds
Which of the following is NOT a result of overdiversification?
Managers emphasize strategic controls rather than financial controls
Pappelbon Enterprises recently acquired a chain of convenience stores offering both fuel and food. Pappelbon is now surprised and dismayed to find that the gas pumps have been poorly maintained and will need to be replaced at considerable expense. All of the following statements accurately reflect this EXCEPT:
Pappelbon's management was overly focused on acquisitions.
Which of the following is NOT one of the three main restructuring strategies?
Realigning
Which of the following is a reason to pursue an acquisition?
To increase speed to market
A primary reason for a firm to pursue an acquisition is to:
achieve greater market power
SpeakEasy, a U.S. software company that specializes in voice-recognition software, wishes to rapidly enter the growing technical translation software market. This market is dominated by firms making highly differentiated products. To enter this market, SpeakEasy would be best served if it considers a(n):
acquisition of a highly related firm in the technical translation market
The use of high levels of debt in acquisitions has contributed to
an increased risk of bankruptcy for acquiring firms
10. Horizontal, vertical, and related acquisitions to build market power:
are likely to undergo regulatory review by various governmental entities
Researchers have found that shareholders of acquired firms often
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.
broaden its competitive scope
Thomas is an upper-middle-level manager for a firm that has been actively involved in acquisitions over the last 10 years. The firm has grown much larger as a result. Thomas has been dismayed to find that recently the managerial culture of the firm has been turning more and more to __________ controls.
bureaucratic
Currently, the rationale for making an acquisition includes all of the following EXCEPT to:
decrease taxes paid by shareholders.
Failing to __________ appropriately will result in too many employees doing the same work and prevent the new firm from realizing the cost synergies it anticipated.
downsize
Problems associated with acquisitions include all of the following EXCEPT:
excessive time spent on the due diligence process
A friendly acquisition
facilitates the integration of the acquired and acquiring firms
Cross-border acquisitions are critical to U.S. firms competing internationally:
if they wish to overcome entry barriers to international markets
Whole-firm LBOs tend to result in all the following negative outcomes EXCEPT:
inefficient operations
Entering new markets through acquisitions of companies with new products is not risk-free, especially if acquisition becomes a substitute for:
innovation
The presence of barriers to entry in a particular market will generally make acquisitions __________ as an
less likely
Compared to internal product development, acquisitions allow:
more accurate prediction of return on investment
The __________ phase is probably the single most important determinant of shareholder value creation in mergers and acquisitions.
post-acquisition integration.
When substantial debt is used to finance acquisitions, firms with successful acquisitions:
reduce the debt quickly
Research has shown that the more __________, the greater is the probability that an acquisition will be successful
related the acquired and acquiring firms are
A leveraged buyout refers to a(n)
restructuring action whereby a party buys all of the assets of a business, financed largely with debt, and takes the firm private
Market power is derived primarily from the
size of a firm and its resources and capabilities
Claude holds a large number of shares of Bayou Beauty, a regional brewing company that is considered a likely takeover target by a major international brewer. It would probably be in Claude's financial interest if Bayou Beauty's owners
sold the company to the larger brewer
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:
the acquisition of Taylor should be primarily for defensive rather than strategic reasons
Due diligence includes all of the following activities EXCEPT assessing:
the level of private synergy between the two firms
Research results indicate all of the following EXCEPT:
the majority of acquisitions increase long-term value for the acquiring firm.
. In a merger:
two firms agree to integrate their operations on a relatively coequal basis
One problem with becoming too large is that large firms
usually increase bureaucratic controls
. The acquisition of Sun Microsystems (a computer hardware producer) by Oracle Corporation (a software firm) is an example of a(n):
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)
vertical acquisition
Manny Inc. recently completed the purchase of its primary supplier. Manny intends to begin expanding the market to which the supplier's products are sold. This purchase is a(n):
vertical acquisition
When a firm acquires its supplier, it is engaging in a(n):
vertical acquisition
The factors that lead to poor long-term performance by acquisitions include all of the following EXCEPT firms: a. with insufficient diversification
with insufficient diversification
