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Exam 10: Mergers and Acquisitions

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Question 1

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Identify the three potential sources of strategic relatedness between bidding and target firms that were detailed by Lubatkin in 1983 and the four general reasons why bidding firms might want to engage in merger and acquisitions as detailed by Jensen and Ruback in 1983.

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The three potential sources of strategic...

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Question 2

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If eBay were to acquire a smaller online auction company, this would be an example of a ________ merger.

A) conglomerate
B) vertical
C) market extension
D) horizontal

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Question 3

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Entrepreneurs must rely on capital generated from their ongoing operations or ________ and debt capital provided by banks.

P&G's purchase of AG-Hutchison Ltd in 2004 is an example of a

If Gillette's managers wanted to maximize the value that Gillette received from its acquisition by P&G, they should

The price of each of a firm's shares multiplied by the number of shares outstanding is known as the firm's current market value.

Operational, functional, strategic, and cultural differences between bidding and target firms can all be compounded by the merger and acquisition process especially if that process was unfriendly.

If bidding and target firms are strategically related, then the economic value of these two firms combined is greater than their economic value as separate entities.

In a product extension merger, a firm acquires complementary products through merger and acquisition activities.

________ does not affect the wealth of target firm equity holders.

Managerial hubris is the well-founded belief held by managers in bidding firms that they can manage the assets of a target firm more efficiently than the target firm's current management.

Strategy researchers have found that in mergers and acquisitions, the more strategically related bidding and target firms are, the more economic value these mergers and acquisitions create.

In a(n) ________, a firm, typically working with an investment banker, sells its equity to the public at large.

If P&G's acquisition of Wella had been delayed because it had to overcome a stipulation in Wella's corporate bylaws requiring that more than 50% of Wella's board of directors had to approve the takeover, this would be an example of

Since both P&G and Gillette are consumer products firms, this acquisition is best described as a

In 2011, the total value of mergers and acquisition deals in the United States was $10 trillion.

The most significant challenge in integrating bidding and target firms has to do with

Perhaps the most significant challenge in integrating bidding and target firms has to do with cultural differences.

In an initial public offering, a firm (typically working with an investment banker) sells its equity to the public at large.

If P&G wanted to increase the probability that it would be able to earn superior economic performance from its acquisition of Gillette, P&G should