Mergers and Acqusitions

Question 1

What is a merger

Answer 1

2 firms agreeing to integrate their operations on a relatively co-equal basis

Question 2

What is an acquisition

Answer 2

a firm that buys a controlling or 100% interest in another firm with the intent of making the acquired firm a subsidiary business within its portfolio

Question 3

What is a takeover

Answer 3

an acquisition in which the target firm doesn’t solicit the acquiring firm’s bid

Question 4

What are the reasons for acquisition (8)

Answer 4

More market power
Overcoming entry barriers
Cost of new product development
Quicker speed to market
low risk than new product development
high diversification
reshape firms competitive scope
learning and developing new capabilities

Question 5

What factors increase market power

Answer 5

ability to sell goods and services raising competitive levels
cost of primary/support activities is lower than the competitors’
a firms size, resources, and capabilities gives it a superior ability to compete

Question 6

What are the three ways to increase market power

Answer 6

Horizontal acquisitions
Vertical acquisitions of suppliers/distributors
Related acquisitions

Question 7

What are the problems in achieving acquisition success

Answer 7

integration difficulties
inadequate target evaluation
extraordinary debt
inability to achieve synergy
too much diversification
managers overly focused on M&A
too large

Question 8

What are the six pillars of managing upwards

Answer 8

communication
understand motivation
solutions not problems
no surprises
manage expectations
reverse mentoring