Question

In terms of the factors motivating a firm entering into an M&A, which of the following is true?
a. Smaller firms are more willing to pursue an M&A because it limits their financial exposure.
b. In high-risk environments, firms are less likely to want to commit resources necessary for an M&A.
c. Managers like M&As in entering developing countries if the systematic country risk is high.
d. M&As are a good way to test a new market and to see if two firms can share technology effectively.

Answer 1

Answer: Option C

Explanation: In developing countries where the systematic risk is very high for the firms, the managers tend to rely on mergers and acquisitions as a method to enter the market. This makes their overall exposure low and the partnering firm helps them with tackling the uncertainties as well as with new contacts in the initial phase.