5-5 Mergers and Acquisitions

What is the primary goal of a merger?

• To form a new entity and improve competitive standing

• To increase product prices

• To eliminate all competitors in the market

• To reduce the number of employees

In an acquisition, what happens to the target company?

• It is controlled by the acquiring company

• It is dissolved and ceases to exist

• It forms a new entity with the acquiring company

• It merges with another target company

What is a horizontal merger?

• A merger between companies in different industries

• A merger between companies at different supply chain levels

• A merger between a parent company and its subsidiary

• A merger between companies in the same industry and supply chain level

Which of the following is an example of a conglomerate merger?

• Kraft Foods Group and H.J. Heinz Co.

• Amazon's acquisition of Whole Foods

• United Airlines and Continental Airlines

• An automaker merging with a steel plant

What is a hostile takeover?

• A friendly acquisition with mutual consent

• A merger between two equal companies

• An acquisition without the consent of the acquired company

• A merger that results in a new company

What is the first step in the M&A process?

• Identify the objective

• Perform due diligence

• Identify the targeted companies

• Analyze the target company's worth

What does due diligence involve?

• Skipping the financial analysis

• Only focusing on the acquiring company's data

• Gathering and reviewing information before making a decision

• Ignoring financial and legal information

Which financial statement shows a company's financial situation at a moment in time?

• Profit and loss statement

• Balance sheet

• Statement of cash flows

• Income statement

What is a management buyout (MBO)?

• When a company buys another company without consent

• When a company acquires another company in a different industry

• When executives purchase a significant portion of the business they manage

• When two companies merge to form a new entity

What is a leveraged buyout (LBO)?

• A merger between two companies of equal size

• An acquisition financed with significant amounts of debt

• A merger that results in a new company

• A friendly acquisition with mutual consent