Business Finance ( Mergers, Acquisitions, & Takeovers)

Question 1

occurs when a buyer acquires all or part of assets or business of a selling entity, and where both parties are actively assisting in the purchase transaction.

Answer 1

Acquisition

Question 2

occurs when two companies combine into one entity

Answer 2

Merger

Question 3

corporations in which one corporation transfer
all its assets to the other, which continues to exist.

Answer 3

Merger

Question 4

one corporations “swallows”
the other, but the shareholders of the
swallowed company receive shares of the
surviving corporation.

Answer 4

Merger

Question 5

is a transaction that result in
the transfer of ownership and control of a
corporation.

Answer 5

Merger

Question 6

When one company purchases another
company of an approximately similar
size. The two companies come together to
become one.

Answer 6

Merger

Question 7

Two companies usually agree to ______
when they feel that they can do something
together that they can not do one their
own.

Answer 7

Merge/ Merger

Question 8

Types of merger

Answer 8

Horizontal Merger

Vertical Merger

Conglomerate Merger

Concentric Merger

Statutory

Subsidiary

Consolidation

Question 9

A merger that happens between
companies belonging to the same
industry.

Answer 9

Horizontal Merger

Question 10

The companies have businesses
in the same space and are generally
competitors to each other.

Answer 10

horizontal merger

Question 11

is a feature of an
industry which consist of a large number of
small firms or fragmented industry.

Answer 11

horizontal merger

Question 12

occurring between
companies producing similar
products, goods and offerings similar
services.

Answer 12

Horizontal merger

Question 13

This type of merger occurs
frequently as a result of larger
companies attempting to create more
effective economies of scale.

Answer 13

Horizontal Merger

Question 14

Examples of Horizontal merger

Answer 14

Lipton India and Brooke Bond.

Bank of Mathura with ICICI Bank.

BSES Ltd with Orissa Power Supply Company.

Associated Cement Companies Ltd Damodar Cement.

Question 15

is a merger between
companies that produce different goods or
offer different services for one common
finished product.

Answer 15

Vertical Merger

Question 16

The companies operate at different levels
in the supply chain of the same industry.

Answer 16

Vertical Merger

Question 17

The motivation behind such mergers (vertical mergers)

Answer 17

cost efficiency, operational efficiency,
increased margins and more control over
the production or the distribution process.

Question 18

A merger between two companies
producing different goods and
services for one specific finished
products.

Answer 18

Vertical Merger

Question 19

The merger of the firm that have
actual or potential buyer-seller
relationship.

Answer 19

Vertical merger

Question 20

example scenario of vertical merger

Answer 20

Car manufacturer
purchasing a tire company.

Question 21

real examples of vertical merger

Answer 21

Time Warner Incorporated, a major cable operation, and the
Turner Corporation, which produces CNN, TBS, and other
programming.

Pixar-Disney Merger

Question 22

A merger between companies that operate in
completely different and unrelated industries.

Answer 22

Conglomerate Merger

Question 23

is between
companies with totally nothing in common.

Answer 23

Pure conglomerate

Question 24

is between
companies looking for market or product
extensions.

Answer 24

mixed conglomerate

Question 25

A merge between firms that are involved in totally interrelated business activity.

Answer 25

Conglomerate merger

Question 26

real examples of conglomerate merger

Answer 26

PepsiCo-Pizza Hut; Proctor & Gamble-Clorox. Walt Disney Company and the American Broadcasting Company.Procter & Gamble Corporation

Question 27

A merger of firms which are into similar type of business.

Answer 27

Concentric Merger

Question 28

often called a congeneric merger, is the merging of firms that operate in the same industry

Answer 28

Concentric merger

Question 29

do not have a mutual relationship (such as a buyer-seller relationship)

Answer 29

Concentric Merger

Question 30

example of congeneric merger

Answer 30

Citigroup's acquisition of Travelers Insurance.

Question 31

is one in which all the assets and liabilities of the smaller company is acquired by the bigger (acquiring) company. As a result, the smaller target company loses its existence as a separate entity.

Answer 31

Statutory Merger

Question 32

is one in which the target company becomes a subsidiary of the bigger acquiring company. This happens because the target company may have a known brand or a strong image which would make sense for the acquiring company to retain.

Answer 32

Subsidiary Merger

Question 33

is one in which both the companies lose their identity as separate entities and become a part of a bigger new company. This is generally the case with both the companies being of the same size.

Answer 33

Consolidation Merger

Question 34

Ways of merger – A merger can take place in following ways:

Answer 34

By purchasing of assets By purchase of common shares By exchanging of shares for assets By exchanging of shares for shares

Question 35

give 5 examples of REASONS OF MERGER

Answer 35

product improvement goodwill diversification of risk future goals mutual benefits maximizing profits expansion of business economy of scale increase market share cost maximization

Question 36

Benefits of merger

Answer 36

Diversification of product and service offerings Increase in plant capacity Larger market share Utilization of operational expertise and research and development (R&D) Reduction of financial risk

Question 37

Why do mergers fail?

Answer 37

Lack of human integration Mismanagement of cultural issues Lack of communication

Question 38

When one company takes over another and clearly established itself as the new owner, the purchase is called an

Answer 38

Acquisition

Question 39

is generally considered negative in nature.

Answer 39

Acquisition

Question 40

A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares.

Answer 40

takeover

Question 41

A takeover attempt that is strongly resisted by the target firm

Answer 41

Hostile takeover

Question 42

Target company's management and board of directors agree to a merger or acquisition by another company.

Answer 42

Friendly takeover

Question 43

Why should firms takeover?

Answer 43

To gain opportunities of market growth more quickly than through internal means To seek to gain benefits from economies of scale To seek to gain a more dominant position in a national or global market To acquire the skills or strengths of another firm to complement the existing business To acquire a speedy access to revenue streams that it would be difficult to build through normal internal growth To diversify its product or service range to protect itself against downturns in its core markets