Quiz 7
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
__________ is most often used when the goal is to refocus on the company's business.
Downscoping
__________ refers to divestiture, spin-off, or some other means of eliminating businesses that are unrelated to a firm's core businesses.
Downscoping
__________ are unsecured obligations that are not tied to specific assets for collateral.
Junk bonds
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 statements is false?
Private synergy is easy for competitors to understand and imitate.
A primary reason for a firm to pursue an acquisition is to:
achieve greater market power.
Without effective due diligence, the:
acquiring firm is likely to overpay for an acquisition.
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.
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:
acquisitions could become a substitute for innovation within your firm./ research suggests that acquisition strategies are a common means of avoiding risky internal ventures./
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
An investor is analyzing two firms in the same industry which are basically identical. She is looking for long-term performance from her investment. Both firms are undergoing restructuring. One firm is involved in substantial downsizing, and the other firm is undertaking aggressive downscoping. The investor should invest in the:
downscoping firm because this will cause the firm to refocus on its core business.
A leveraged buyout will often result in a short-term outcome of __________, which, in turn, leads to a long-term outcome of __________.
high debt costs; higher risk
Whole-firm LBOs tend to result in all the following negative outcomes EXCEPT:
inefficient operations.
Compared to internal product development, acquisitions allow:
more accurate prediction of return on investment.
Acquisitions can take a lot of time for top level managers for all the following reasons EXCEPT:
only top managers can perform the required due diligence.
Cross-border acquisitions are primarily made to:
overcome barriers to entry in another country.
When substantial debt is used to finance acquisitions, firms with successful acquisitions:
reduce the debt quickly.
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:
restructure.
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.
When the target firm does not solicit the acquiring firm's bid, it is referred to as a(n):
takeover or unfriendly acquisition.
Research results indicate all of the following EXCEPT:
the majority of acquisitions increase long-term value for the acquiring firm.
The expenses incurred by firms trying to create synergy through acquisition are called __________ costs.
transaction
In a merger:
two firms agree to integrate their operations on a relatively coequal basis.
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.
unrelated diversification
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.
The acquisition of Sun Microsystems (a computer hardware producer) by Oracle Corporation (a software firm) is an example of a(n):
vertical acquisition.
The factors that lead to poor long-term performance by acquisitions include all of the following EXCEPT firms:
with insufficient diversification.
