3.2.2 Mergers/Takeovers

Question 1

What are three factors that led businesses to merge or takeover?

Answer 1

Breaking into new markets
Diversification
Synergy

Question 2

Define a merger?

Answer 2

joining together two or more firms to form a single business - normally retain their own identities

Question 3

Define a takeover?

Answer 3

one firm makes bid for another and secures 50% of shares

Question 4

What makes mergers different from takeovers?

Answer 4

Mergers are approved by shareholders and management

Question 5

Define horizontal integration?

Answer 5

two businesses in the same industry have joined together

Question 6

Define vertical integration?

Answer 6

two business in the same industry but at different stages of the production process

Question 7

Define conglomerate integration?

Answer 7

two businesses that have nothing in common join together

Question 8

Define forward vertical integration?

Answer 8

Business joins with another in next stage of production

Question 9

Define backwards vertical integration?

Answer 9

Business joins with another at previous stage of production

Question 10

3 financial risks that come with mergers/takeovers?

Answer 10

resistance from employees
Bidding costs
integration costs

Question 11

3 problems with rapid growth?

Answer 11

Drain of resources
Loss of control
Coping with change

Question 12

3 reasons why businesses may want to join together?

Answer 12

Access to synergies
Increase profitability
Growth