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Questions and Answers
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 a potential benefit of a merger or acquisition in terms of competition?
What is a possible reason companies might choose to merge?
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What is a potential synergy resulting from a merger?
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What is a disadvantage of mergers and acquisitions?
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What is a potential result of a merger or acquisition?
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What is a financial advantage of mergers and acquisitions?
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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?
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What is a characteristic of a merger?
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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?
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How are the power dynamics typically structured in a merger?
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What happens to the stock in a merger?
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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?
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What does the return on investment refer to?
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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?
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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?
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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?
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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.
