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Questions and Answers
Why might a company acquire another company to obtain a specific product?
Why might a company acquire another company to obtain a specific product?
What is the primary difference between a merger and an acquisition?
What is the primary difference between a merger and an acquisition?
What is a potential benefit of a merger or acquisition in terms of competition?
What is a potential benefit of a merger or acquisition in terms of competition?
What is a possible reason companies might choose to merge?
What is a possible reason companies might choose to merge?
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What is a potential synergy resulting from a merger?
What is a potential synergy resulting from a merger?
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What is a disadvantage of mergers and acquisitions?
What is a disadvantage of mergers and acquisitions?
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What is a potential result of a merger or acquisition?
What is a potential result of a merger or acquisition?
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What is a financial advantage of mergers and acquisitions?
What is a financial advantage of mergers and acquisitions?
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What is the primary rationale behind M&A deals?
What is the primary rationale behind M&A deals?
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What happens to the target company's business operations in an acquisition?
What happens to the target company's business operations in an acquisition?
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What is a characteristic of a merger?
What is a characteristic of a merger?
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What is a common reason why target companies agree to be acquired?
What is a common reason why target companies agree to be acquired?
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What is a potential benefit of a merger or acquisition?
What is a potential benefit of a merger or acquisition?
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How are the power dynamics typically structured in a merger?
How are the power dynamics typically structured in a merger?
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What happens to the stock in a merger?
What happens to the stock in a merger?
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What is a characteristic of an acquisition?
What is a characteristic of an acquisition?
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What is the fundamental concept that states that an increased probability for return is highly correlated with the increase in the level of risk taken?
What is the fundamental concept that states that an increased probability for return is highly correlated with the increase in the level of risk taken?
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What does the return on investment refer to?
What does the return on investment refer to?
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What is the risk that investors who buy financial securities face?
What is the risk that investors who buy financial securities face?
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What is an example of a risk that a company faces when it borrows money?
What is an example of a risk that a company faces when it borrows money?
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What is an example of an industrial risk?
What is an example of an industrial risk?
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What is the primary reason why an investor could expect higher return on investment only if willing to accept a higher level of risk?
What is the primary reason why an investor could expect higher return on investment only if willing to accept a higher level of risk?
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What is the risk of not being able to sell a security at its fair value?
What is the risk of not being able to sell a security at its fair value?
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What is the risk that a creditor will lose his entire investment if a debtor cannot repay him in full?
What is the risk that a creditor will lose his entire investment if a debtor cannot repay him in full?
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Study Notes
Mergers and Acquisitions
- Two companies of same size combine to increase strength and financial gains, breaking trade barriers.
- A buyout agreement is known as a merger when both owners mutually agree to combine their business.
- A buyout agreement is known as an acquisition when the target firm is unwilling to be bought or when the agreement is hostile.
Reasons for Mergers and Acquisitions
- To increase size and resources for marketing, product expansion, and financing.
- To reduce costs by merging similar operations.
- To reduce competition in the marketplace.
- To achieve synergy in operations.
Types of Acquisitions
- Strategic acquisitions to obtain a specific product or technology.
- Acquisitions to increase size and market share.
- Acquisitions to obtain control over critical resources.
Advantages of Mergers and Acquisitions
- Access to talent.
- Cost benefits.
- Economies of scale.
- Financial power.
- Reduced competition.
- Reduced risk.
- Tax advantages.
Challenges of Mergers and Acquisitions
- Conflict of culture.
Definition of Merger and Acquisition
- Merger: When two or more companies come together to expand their business operations.
- Acquisition: When one company or corporation takes control of another company and rules all its business operations.
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Description
This quiz covers the basics of mergers and acquisitions, including the differences between the two and the benefits of combining companies.
