Understanding Mergers in Business
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Questions and Answers

What is the main difference between a merger and an acquisition?

  • In a merger, one entity takes over another, while in an acquisition, two entities combine to form a new organization.
  • In a merger, shareholders of both companies jointly possess shares of the new organization, while in an acquisition, shareholders do not possess any shares.
  • In a merger, two separate entities combine to form a new organization, while in an acquisition, one entity takes over another. (correct)
  • In a merger, there is no exchange of shares, while in an acquisition, shareholders of the target company receive money from the buyer.

    • What is the primary goal of a horizontal acquisition?

  • To eliminate competition and establish a monopoly in the market.
  • To acquire companies that extend the market reach geographically.
  • To gain market share by consolidating with another company in the same industry. (correct)
  • To diversify into unrelated industries for risk reduction.

    • How do horizontal acquisitions differ from market extension acquisitions?

  • Horizontal acquisitions aim to reduce risk by entering new markets, while market extension acquisitions aim to increase competition in existing markets.
  • Horizontal acquisitions involve unrelated industries, while market extension acquisitions focus on similar industries.
  • Horizontal acquisitions focus on increasing market share, while market extension acquisitions focus on entering new geographic markets. (correct)
  • Horizontal acquisitions involve diversifying into different industries, while market extension acquisitions focus on consolidation within the same industry.

    • Why did Exxon and Mobil merge in 1999?

    <p>To increase bargaining power and competitive position in the oil and gas industry.</p> Signup and view all the answers

    What distinguishes a conglomerate acquisition from a vertical acquisition?

    <p>A conglomerate acquisition involves two unrelated businesses, while a vertical acquisition involves businesses at different stages of the production process.</p> Signup and view all the answers

    What is the main difference between a merger and an acquisition?

    <p>In a merger, two companies unite to form a new entity, while in an acquisition, the smaller company is consumed by the larger one.</p> Signup and view all the answers

    Why do companies commonly complete mergers according to the text?

    <p>To reduce costs of operations.</p> Signup and view all the answers

    What happens to the shares of the new company after a merger?

    <p>They are distributed to shareholders of the original businesses.</p> Signup and view all the answers

    Which of the following is NOT one of the major types of mergers mentioned in the text?

    <p>Market saturation</p> Signup and view all the answers

    What do acquisitions generally carry, according to the text?

    <p>A more negative connotation than mergers.</p> Signup and view all the answers

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