Mergers and Acquisitions: Terms, Definitions, and Concepts, Quizzes of Strategic Management

Download Mergers and Acquisitions: Terms, Definitions, and Concepts and more Quizzes Strategic Management in PDF only on Docsity! TERM 1 merger DEFINITION 1 is a strategy through which two firms agree to integrate their operations on a relatively coequal basis TERM 2 acquisition DEFINITION 2 is a strategy through which one firms buys a controlling, or 100 percent, interest in another firm with the intent of making the acquired firm a subsidiary business within its portfolio TERM 3 takeover DEFINITION 3 is a special type of acquisition wherein the target firm does not solicit the acquiring firm's bid; unfriendly acquisition TERM 4 market power DEFINITION 4 is the primary reason for acquisitions; exists when a firm is able to sell its goods or services above competitive levels or when the costs of its primary or support activities are lower than those of its competitors TERM 5 horizontal acquisition DEFINITION 5 the acquisition of a company competing in the same industry as the acquiring firm; they result in higher performance when the firms have similar characteristics such as strategy, managerial styles, and resource allocation patterns TERM 6 vertical acquisition DEFINITION 6 refers to a firm acquiring a supplier or distributor of one or more of its goods or services; the newly formed firm controls additional parts of the value chain which gains it more market power TERM 7 related acquisition DEFINITION 7 acquiring a firm in a highly related industry; firms seek to create value through synergy that can be generated by integrating some of their resources and capabilities TERM 8 cross-border acquisition DEFINITION 8 acquisitions made between companies with headquarters in different countries TERM 9 the higher the barriers to market entry... DEFINITION 9 the greater the probability that a firm will acquire an existing firm to overcome them TERM 10 Reasons for acquisitions DEFINITION 10 increasing market power overcoming entry barriers avoid high cost of new product development & increase speed to market entry lower risk compared to developing new products increase diversification reshaping the firms competitive scope learning and developing new capabilities TERM 21 attribute: firm conducts effective due diligence and evaluates target firm's health DEFINITION 21 result: firms with strongest complementarities are acquired and overpayment is avoided TERM 22 attribute: financial slack DEFINITION 22 result: financing (debt or equity) is easier and less costly to obtain TERM 23 attribute: firm maintains low to moderate debt position DEFINITION 23 result: lower financing cost, lower risk (of bankruptcy), and avoidance of trade-offs that are associated with high debt TERM 24 attribute: firm has sustained and emphasized R&D and innovation DEFINITION 24 result: maintain long-term competitive advantage in markets TERM 25 attribute: firm manages change well and is flexible and adaptable DEFINITION 25 result: faster and more effective integration facilitates achievement of synergy TERM 26 restructuring DEFINITION 26 is a strategy through which a firm changes its set of businesses or its financial structure TERM 27 downsizing DEFINITION 27 is a reduction in the number of a firm's employees and sometimes in the number of its operating units, but it may or may not change the composition of businesses in the company's portfolio TERM 28 downscoping DEFINITION 28 refers to divestiture, spin-off, or some other means of eliminating businesses that are unrelated to a firm's core business; it has a more positive effect on firm performance than does downsizing because firms commonly find that it causes them to refocus on their core business TERM 29 leveraged buyout (LBO) DEFINITION 29 is a restructuring strategy whereby a party (typically a private equity firm) buys all of a firm's assets in order to take the firm private; then the company's stock is no longer traded publicly TERM 30 Management buyout (MBO), Employee buyout (EBO) and whole-firm buyouuts DEFINITION 30 all three types of LBOs where one company or partnership purchases an entire company instead of a part of it