Definitions
change the company’s activities
diversify
Internal (organic) growth occurs when a business decides ______________ its own activities by
launching new products and/or entering new markets.
to expand
When a target company agrees to be purchased it means a hostile acquisition.
false
Occurs when a firm acquires former suppliers or customers
Horizontal Merger
Vertical Merger
Product Extension Merger
Market Extension Merger
Vertical Merger
What is it?
Business ‘A’ and Business ‘B’ each want to expand but do not feel they
can get any bigger alone. The two businesses decide to come together and share their locations,
stock, marketing, products and staff. This allows them to grow together as a single business.
An example of a merger
create an independent company selling an existing business or division of a parent company
spin off
Business growth is often an important business ____________ because it may help to increase market share, increase revenue and improve profits.
objective
Merger is the agreement between two parties to work together on one project.
true
Why do companies engage in M&A?
For better brand recognition
To grow in size and bounce their rivals
Because of increasing competition
All of these
To grow in size and bounce their rivals
What is it?
Business ‘A’ (the acquiring company) decides it wants to grow but the
area it wants to grow into is already occupied by a similar or smaller business; called Business ‘B’
(the target company). Business ‘A’ decides to buy a controlling stake (over 50%) of the shares in
Business ‘B’ in order to take control. This gives Business ‘A’ access to growth through ownership of
a new business in either the same or a different area of the market.
An example of a takeover
smaller company that is owned by another company
subsidiary
_________________ or a conglomerate merger occurs when businesses in unrelated markets
join through a takeover or merger.
Diversification
Mergers and acquisitions are unlikely to improve share value.
false
What is a leveraged buyout?
It is a type of joint venture.
It is an acquisition in which a large acquirer has leverage through bargaining power over a small target.
It is an acquisition that is funded from a relatively large amount of debt.
It is an acquisition that is funded from a relatively low amount of debt.
It is an acquisition that is funded from a relatively large amount of debt.
What is it?
Sometimes one company attempts to buy another company by borrowing a large amount of money
in order to finance the acquisition. The acquiring company issues bonds against the combined
assets of the two companies, meaning that the assets of the acquired company can actually be
used as collateral against it.
leveraged buyouts
an offer to purchase another company
takeover bid
_____________________occurs when two competitors working in the same field join through
a merger or takeover.
Horizontal integration
The role of mergers and acquisitions has evolved as a strategy tool for fast-track technology-led companies.
true
When British Airways merged with Iberia, the Spanish airline, what kind of merger was this?
Vertical
Horizontal
Joint venture
Conglomerate
Horizontal
What is it?
A hostile takeover defense whereby a 'friendly' individual or company acquires a corporation at fair consideration when it is on the verge of being taken over by an 'unfriendly' bidder or acquirer.
white knight
sell unwanted companies
divest
___________________________ occurs when a business takes control of another that
operates at a later stage in the supply chain (a distributor or retail outlets).
Forward vertical integration
Investment bankers offer strategic and tactical advice and acquisition opportunities, screen potential buyers and sellers, make initial contact with a seller or buyer, and provide negotiation support for their clients. True or False?
True
Which of the following are often participants in the acquisition process?
a. Investment bankers
b. Lawyers
c. Accountants
d. All of the above
d. All of the above
What is it?
A colloquial term for a defense strategy used by the directors of a public company to prevent activist investors, competitors, or other would-be acquirers from taking control of the company by buying up large amounts of its stock.
poison pill