Question

What does it mean when an acquisition is unable to achieve synergy?

a. When a firm finds itself in extraordinary debt as the result of acquiring another firm

b. When the acquiring firm and acquired firm do not effectively share resources, economies of scale, and economies of scope across the businesses

c. When a firm has too many business units and no clear method of measuring their performance

d. When a firm becomes so large it does not have the economics necessary to manage the complexity of the organization made by the acquisition

Which of the following statements best explains how shareholders are affected by acquisitions?

a. Acquired firms' shareholders often earn above-average returns as a result of acquisitions, whereas acquiring firms' shareholders often earn below-average returns as a result of acquisitions.

b. Acquired firms' shareholders often earn above-average returns as a result of acquisitions, whereas acquiring firms' shareholders often earn returns that are close to zero as a result of acquisitions.

c. Acquired firms' shareholders often earn below-average returns as a result of acquisitions, whereas acquiring firms' shareholders often earn above-average returns as a result of acquisitions.

d. Both acquired and acquiring firms' shareholders often earn above-average returns as a result of acquisitions.

The four determinants of national advantage are factors of production; demand conditions; firm strategy, structure, and rivalry; and:

a. nature and size of domestic market.

b. related and supporting industries.

c. factors of distribution.

d. unrelated industries.

Answer 1

Answer 1 : b. When the acquiring firm and acquired firm do not effectively share resources, economies of scale, and economies of scope across the businesses

Note : Synergy is achieved when both the acquiring and acquired firms posses similar level of resources, economies of scale and scope across the business so that they are both in win win position

Answer 2 : b. Acquired firms' shareholders often earn above-average returns as a result of acquisitions, whereas acquiring firms' shareholders often earn returns that are close to zero as a result of acquisitions.

Note : One of the major factor that a shareholders of the acquiring firm faces is not earning the returns that is equal to zero when the firm is acquired.

Answer 3 : b. related and supporting industries.

Note : This determinant of national advantage include supporting the facilities, services in terms of distribution, design etc.