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Mergers and Acquisitions Overview

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Questions and Answers

What typically occurs during a merger?

One company immediately takes over another.

A smaller business gains control over a larger business.

Two businesses of roughly the same size combine. (correct)

Shareholders lose their interests in the new firm.

What is a characteristic of an acquisition?

The larger business usually takes control of the smaller business. (correct)

It always results in a new brand being created.

The smaller business maintains independent operations.

The two businesses merge as equals.

In a horizontal merger, which of the following occurs?

A retailer merges with a manufacturer.

Two companies producing similar products combine. (correct)

One company acquires a supplier.

Two businesses in unrelated industries unite.

What type of merger involves companies that are direct suppliers and customers of each other?

Vertical merger Signup and view all the answers

Which merger type involves businesses from completely unrelated industries?

Conglomerate merger Signup and view all the answers

What generally happens to the shareholders of a target firm during an acquisition?

They might sell their shares to the acquiring firm. Signup and view all the answers

Which statement is false regarding mergers and acquisitions?

Mergers involve companies of significantly different sizes. Signup and view all the answers

Study Notes

Mergers

Two businesses of similar size combine; management and owners agree it's beneficial.
Often forms a new business where previous shareholders retain significant interest.

Acquisitions/Takeovers

Larger business gains control of a smaller one.
Target firm shareholders might sell shares to the acquiring firm or become minority shareholders in the combined entity.

Types of Mergers & Acquisitions

Horizontal merger: Companies producing similar products in the same industry merge (e.g., two auto manufacturers).
Vertical merger: Companies in the same industry merge, one being the direct customer or supplier of the other (e.g., tire manufacturer merging with an auto manufacturer).
Conglomerate merger: Companies in unrelated industries merge (e.g., grocery chain merging with an auto manufacturer).

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Description

Explore the fundamentals of mergers and acquisitions, including types and strategies used by businesses. Understand the differences between horizontal, vertical, and conglomerate mergers. This quiz will enhance your knowledge of business combinations and their implications.