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?

To increase bargaining power and competitive position in the oil and gas industry. (C) Signup and view all the answers

What distinguishes a conglomerate acquisition from a vertical acquisition?

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

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

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