BUSA 4980 EXAM 2 QUESTIONS WELL ANSWERED LATEST UPDATE 2026
Merger - Answers -two firms agree to integrate their operations on a "relatively" co-equal basis
Acquisition - Answers -one firm buys a controlling, or 100%, interest in another firm with the intent of
making the acquired firm a subsidiary business within its portfolio
Takeover - Answers -an acquisition in which the target firm did not solicit the acquiring firm's bid for
outright ownership
Problems in achieving acquisition success - Answers -integration difficulties
-inadequate target evaluation
-too large
-managers overly focused on acquisitions
-extraordinary debt
-too much diversification
-inability to achieve synergy
Due diligence - Answers -the process of evaluating a target firm for acquisition
-examines:
--financing of the intended transaction
--differences in culture between the firms
--tax consequences of the transaction
--actions necessary to meld the two workforces
restructuring - Answers -a strategy through which a firm changes its set of businesses or financial
structure
-failure of an acquisition strategy often precedes a restructuring strategy
-strategies include: downsizing, downscoping, and leveraged buyouts
Market Power Acquisitions: Horizontal Acquisitions - Answers -acquisition of a firm in the same
industry in which the acquiring firm competes
-acquisitions with similar characteristics result in higher performance than those with dissimilar
characteristics
Market Power Acquisitions: Vertical Acquisitions - Answers -acquisition of a supplier or distributor of
one or more of the firm's goods or services
--increase a firm's market power by controlling additional parts of the value chain.
Market Power Acquisitions: Related Acquisitions - Answers -acquisition of a firm in a highly related
industry
Acquisitions: Increased Market Power - Answers factors increase market power when:
-there is the ability to sell goods or services above competitive levels
-costs of primary or support activities are below those of competitors
-a firm's size, resources and capabilities gives it a superior ability to compete
Acquisitions: Increased Market Power - Answers -horizontal acquisitions of other firms in the same
industry
-vertical acquisitions of suppliers or distributors of the acquiring firm.
-related acquisitions of firms in related industries
Overcoming entry barriers - Answers acquisitions can address issues with:
--economies of scale
--differentiated products
cross border acquisitions:
-acquisitions made between firms with headquarters in different countries:
--are often made to overcome entry barriers
--can be difficult to negotiate and operate because of the differences in foreign cultures
acquisitions: Cost of new-product development and increased speed to market - Answers -internal
development of new products is often perceived as a high-risk activity
-acquisitions allow a firm to gain access to new and current products that are new to the firm.
-returns are more predictable because of the acquired firms' past experience with its products.
acquisitions: lower risk compared to developing new products - Answers -an acquisition's outcomes
can be estimated more easily and accurately than the outcomes of an internal product development
process
, acquisitions: increased diversification - Answers -using acquisitions to diversify a firm is the quickest
and easiest way to change its portfolio of businesses
-the more related the acquired firm is to the acquiring firm, the greater is the probability that the
acquisition will be successful
acquisition: reshaping the firm's competitive scope - Answers an acquisition can:
-reduce the negative effect of an intense rivalry on a firm's financial performance
-reduce a firm's dependence on one or more products or markets
-reducing a firm's dependence on specific markets alters the firm's competitive scope.
acquisition: learning and developing new capabilities - Answers -an acquiring firm can gain
capabilities that the firm does not currently possess:
-special technological capability
-a broader knowledge base
-reduced inertia
-firms should acquire other firms with different but related and complementary capabilities in order
to build their own knowledge base.
Synergy - Answers -when assets are worth more when used in conjunction with each other than
when they are used separately
private synergy - Answers -when the combination and integration of the acquiring and acquired firms'
assets yields capabilities and core competencies that could not be developed by combining and
integrating either firm's assets with another firm.
advantage: it is difficult for competitors to understand and imitate
disadvantage: it is also difficult to create
effective acquisition strategies - Answers -complementary assets/resources- buying firms with assets
that meet current needs to build competitiveness
-friendly acquisitions: friendly deals make integration go more smoothly
-careful selection process: deliberate evaluation and negotiations are more likely to lead to easy
integration and building synergies.
-maintain financial slack: provide enough additional financial resources so that profitable projects
would not be foregone
attributes of effective acquisitions - Answers -low to moderate debt-> merged firm maintains
financial flexibility
-sustained emphasis on innovation-> continue to invest in R&D as part of the firm's overall strategy
-flexibility-> has experience at managing change and is flexible and adaptable
Identifying international incentives - Answers international strategy:
- a strategy through which the firm sells its goods or services outside its domestic market
incentives to use international strategy:
-new market expansion extends product life cycle
-gain access to materials and resources
-integration of operations on a global scale
-better use of rapidly developing technologies
-international markets yield potential new opportunities
international strategy basic benefits: - Answers -increased market size
-economies of scale
-location advantages
multidomestic strategy - Answers -strategy and operating decisions are decentralized to strategic
business units in each country
-products and services are tailored to local markets.
global strategy - Answers -products are standardized across national markets
-emphasis on economies of scale
-often lacks responsiveness to local markets
transnational strategy - Answers -seeks to achieve both global efficiency and local responsiveness
cooperative strategy - Answers -a strategy in which firms work together to achieve a shared objective
-cooperating with other firms is a strategy that:
Merger - Answers -two firms agree to integrate their operations on a "relatively" co-equal basis
Acquisition - Answers -one firm buys a controlling, or 100%, interest in another firm with the intent of
making the acquired firm a subsidiary business within its portfolio
Takeover - Answers -an acquisition in which the target firm did not solicit the acquiring firm's bid for
outright ownership
Problems in achieving acquisition success - Answers -integration difficulties
-inadequate target evaluation
-too large
-managers overly focused on acquisitions
-extraordinary debt
-too much diversification
-inability to achieve synergy
Due diligence - Answers -the process of evaluating a target firm for acquisition
-examines:
--financing of the intended transaction
--differences in culture between the firms
--tax consequences of the transaction
--actions necessary to meld the two workforces
restructuring - Answers -a strategy through which a firm changes its set of businesses or financial
structure
-failure of an acquisition strategy often precedes a restructuring strategy
-strategies include: downsizing, downscoping, and leveraged buyouts
Market Power Acquisitions: Horizontal Acquisitions - Answers -acquisition of a firm in the same
industry in which the acquiring firm competes
-acquisitions with similar characteristics result in higher performance than those with dissimilar
characteristics
Market Power Acquisitions: Vertical Acquisitions - Answers -acquisition of a supplier or distributor of
one or more of the firm's goods or services
--increase a firm's market power by controlling additional parts of the value chain.
Market Power Acquisitions: Related Acquisitions - Answers -acquisition of a firm in a highly related
industry
Acquisitions: Increased Market Power - Answers factors increase market power when:
-there is the ability to sell goods or services above competitive levels
-costs of primary or support activities are below those of competitors
-a firm's size, resources and capabilities gives it a superior ability to compete
Acquisitions: Increased Market Power - Answers -horizontal acquisitions of other firms in the same
industry
-vertical acquisitions of suppliers or distributors of the acquiring firm.
-related acquisitions of firms in related industries
Overcoming entry barriers - Answers acquisitions can address issues with:
--economies of scale
--differentiated products
cross border acquisitions:
-acquisitions made between firms with headquarters in different countries:
--are often made to overcome entry barriers
--can be difficult to negotiate and operate because of the differences in foreign cultures
acquisitions: Cost of new-product development and increased speed to market - Answers -internal
development of new products is often perceived as a high-risk activity
-acquisitions allow a firm to gain access to new and current products that are new to the firm.
-returns are more predictable because of the acquired firms' past experience with its products.
acquisitions: lower risk compared to developing new products - Answers -an acquisition's outcomes
can be estimated more easily and accurately than the outcomes of an internal product development
process
, acquisitions: increased diversification - Answers -using acquisitions to diversify a firm is the quickest
and easiest way to change its portfolio of businesses
-the more related the acquired firm is to the acquiring firm, the greater is the probability that the
acquisition will be successful
acquisition: reshaping the firm's competitive scope - Answers an acquisition can:
-reduce the negative effect of an intense rivalry on a firm's financial performance
-reduce a firm's dependence on one or more products or markets
-reducing a firm's dependence on specific markets alters the firm's competitive scope.
acquisition: learning and developing new capabilities - Answers -an acquiring firm can gain
capabilities that the firm does not currently possess:
-special technological capability
-a broader knowledge base
-reduced inertia
-firms should acquire other firms with different but related and complementary capabilities in order
to build their own knowledge base.
Synergy - Answers -when assets are worth more when used in conjunction with each other than
when they are used separately
private synergy - Answers -when the combination and integration of the acquiring and acquired firms'
assets yields capabilities and core competencies that could not be developed by combining and
integrating either firm's assets with another firm.
advantage: it is difficult for competitors to understand and imitate
disadvantage: it is also difficult to create
effective acquisition strategies - Answers -complementary assets/resources- buying firms with assets
that meet current needs to build competitiveness
-friendly acquisitions: friendly deals make integration go more smoothly
-careful selection process: deliberate evaluation and negotiations are more likely to lead to easy
integration and building synergies.
-maintain financial slack: provide enough additional financial resources so that profitable projects
would not be foregone
attributes of effective acquisitions - Answers -low to moderate debt-> merged firm maintains
financial flexibility
-sustained emphasis on innovation-> continue to invest in R&D as part of the firm's overall strategy
-flexibility-> has experience at managing change and is flexible and adaptable
Identifying international incentives - Answers international strategy:
- a strategy through which the firm sells its goods or services outside its domestic market
incentives to use international strategy:
-new market expansion extends product life cycle
-gain access to materials and resources
-integration of operations on a global scale
-better use of rapidly developing technologies
-international markets yield potential new opportunities
international strategy basic benefits: - Answers -increased market size
-economies of scale
-location advantages
multidomestic strategy - Answers -strategy and operating decisions are decentralized to strategic
business units in each country
-products and services are tailored to local markets.
global strategy - Answers -products are standardized across national markets
-emphasis on economies of scale
-often lacks responsiveness to local markets
transnational strategy - Answers -seeks to achieve both global efficiency and local responsiveness
cooperative strategy - Answers -a strategy in which firms work together to achieve a shared objective
-cooperating with other firms is a strategy that:
