12: Mergers and Acquisitions

Name:

Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question.

Horizontal diversification is where an acquiring firms seeks to gain control of:

a.	A direct competitor	c.	A distributor
b.	A supplier	d.	A firm of equivelant size

Synergy is the concept that firms that merge may be able to (select the best definition):

a.	Create greater value in combination than as separate businesses	c.	Minimise the costs of integration
b.	Remove competition from the market	d.	Create new product markets

The market for corporate control is argued to exist because:

a.	Firms become cash rich as they mature	c.	Managers can become over-indulgent in their consumption of perks
b.	Managers are rewarded by share option schemes	d.	The value of the firm has fallen below its debt value

The eat or be eaten hypothesis suggests that merger waves occur because:

a.	Corporate management overindulges in wasteful projects and perks	c.	Corporate management seek acquisitions to deter potential hostile bids
b.	Corporate management seek an attractive bidder to deter a hostile takeover	d.	Corporate management acquire other firms to satisfy investor demands

In UK merger legislation the core test applied before permission is given for a merger or acquisition to proceed that has been referred to the Competition Commission:

a.	Substantial lessening of competition	c.	Substantial increase in shareholder value
b.	Substantial impact upon the economy	d.	Substantial improvement in products or services