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Exam 7: Merger and Acquisition Strategies

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Question 31

Multiple Choice

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The presence of barriers to entry in a particular market will generally make acquisitions ____ as an entry strategy.

A) less likely
B) more likely
C) prohibitive
D) illegal

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Question 32

Multiple Choice

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Which of the following is NOT one of the three main restructuring strategies?

A) realigning
B) downsizing
C) downscoping
D) leveraged buyouts

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Question 33

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Firms are more likely to enter a market through acquisition when high product loyalty is present in the industry.

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.

A horizontal acquisition involves two firms in the same industry.

Case Scenario : Raptec Raptec was incorporated in 1991 and went public on the Nasdaq Stock Market in 1996. Raptec's strategy is to become the global leader in innovative storage solutions. Raptec is an S&P 500 and a Nasdaq Stock Market 100 member. The company's hardware and software solutions for eBusiness and Internet applications move, manage, and protect critical data and digital content. Raptec operates in three principal business segments: Direct Attached Storage ("DAS"), Storage Networking Solutions ("SNS") and Software. These hardware and software products are found in high-performance networks, servers, workstations, and desktops from the world's leading OEMs, and are sold through distribution channels to Internet service providers, enterprises, medium and small businesses, and consumers. Since the time it went public, Raptec has experienced rapid growth and consistently profitable operations. In early 2007, the company announced its plan to spin-off the software segment, subsequently incorporated as Axio, Inc., in the form of a fully independent and separate company. Software was Raptec's most profitable and fastest growing segment. By mid-2007 Raptec had completed the initial public offering of approximately 15% of Axio's stock, and then distributed the remaining Axio stock to Raptec's stockholders in a tax-free distribution. -(Refer to the above Case Scenario ) Why would a successful firm like Raptec spin off its most promising business?

A(an) ____ occurs when one firm buys a controlling, or 100% interest, in another firm.

The use of high levels of debt in acquisitions has contributed to

Most acquisitions that are designed to achieve greater market power entail buying a competitor, a supplier, a distributor, or a business in a highly related industry.

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(an)

The leadership of apparel maker Liz Claiborne acquired a number of firms in sportswear apparel growing from 16 to 36 brands. While its managers were focused on making acquisitions, industry consolidation was taking place, leaving less room for so many brands. Additionally, competitors were gaining favor with customers leaving fewer sales for Claiborne products. This situation was the result of

Acquisitions can become a substitute for innovation in some firms and trigger future rounds of acquisitions.

Transaction costs resulting from an acquisition refer to the direct and indirect costs resulting from the use of acquisition strategies to create synergies.

Due diligence is performed by investment banking firms because of laws protecting shareholders during acquisitions.

Each of the following is a rationale for acquisitions EXCEPT

Junk bonds are a financing option through which risky acquisitions are financed with debt that provides a large potential return to bondholders.

There are few true mergers because

Describe how an acquisition program can result in managerial time and energy absorption.

After a leveraged buyout, ____ typically occur(s) .

One of the potential problems associated with acquisitions is that the additional costs required to manage the larger firm will exceed the benefits of economies of scale and additional market power.