MGMT 498 Final Test Chapter 9 And 10

64 cards

Mgmt 498 Final Test


 
  
Created May 8, 2009
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rochie7314

 

 
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1
Strategic Acquirers
 
use acquisitions to extend their current business, to leverage their current capabilities or...
2
Investment Acquirers
 
do not extend or enhance, they acquire a portfolio of under performing firms and then implement...
3
Private equity firms
 
similar to investment, but impose a variety of fees and other charges on the firms they acquire...
4
Common way a firm can accomplish its vertical integration and diversification objectives?
 
mergers and acquisitions
5
Acquisition
 
A firm engages in acquisition when it purchases a second firm
6
Ways to purchase an acquisition
 
use cash generated from ongoing business, go into debt to purchase, use own equity to purchase,...
7
How much can an acquiring firm purchase?
 
all of its assets, a majority (51%),  or a controlling share
8
Controlling Share
 
enough assets so that the acquiring firm is able to make all the mgmt and strategic decisions...
9
Friendly vs. Unfriendly Acquisitions(Hostile Takeovers)
 
when the mgmt wants the firm to be acqrd, vs when mgmt doesn't want the firm to be acqrd.
10
How are firms acquired otherwise?
 
through direct negotiations(privately held or closely held), publicly announce it is willing...
11
Privately held
 
when it has not sold shares on the public market
12
Closely held
 
when it has not sold very many share on the public stock market
13
Acquisition premium
 
the difference between the current market price of a target firm's shares and the price a potential...
14
What is the approach to purchasing a firm through an acquisition premium called?
 
Tender offer
15
Merger
 
when the assets of two similar-sized firms are combined
16
Current Market Value
 
the price of each of a firm's shares times the number of shares outstanding
17
FTC responsibility (Federal Trade Commission)
 
charged with the responsibility  of evaluating the competitive implications of proposed...
18
FTC Categories of Mergers and Acquisitions
 
vertical merger, horizontal merger, product extension merger, market extension merger, and...
19
Vertical merger
 
when a firm vertically integrates forward or backward thorough its acquisition efforts, acquires...
20
FTC disallows any acquisition involving firms with headquarters in the U.S. that could have...
 
monopoly or oligopoly profits in an industry
21
Horizontal Merger
 
when a firm acquires a former competitor
22
Product extension merger
 
firms acquire complementary products through their merger and acquisition activities
23
Market extension merger
 
primary objective is to gain access to new complementary geographic markets
24
Conglomerate Merger
 
when there is no strategic relatedness between a bidding and a target firm
25
Mergers and acquisitions between strategically unrelated firms will not generate what?
 
economic profits for either bidders or targets
26
Potential sources of strategic relatedness between bidding and target firms
 
technical economies, pecuniary economies, and diversification economies
27
Technical economies
 
scale economies that occur when the physical processes inside a firm are altered so that the...
28
Pecuniary economies
 
economies achieved by the ability of  firms to dictate prices by exerting market power
29
Diversification economies
 
economies achieved by improving a firm's performance relative to its risk attributes or lowering...
30
Why bidding firms might want to engage in merger and acquisition strategies
 
to reduce production or distribution costs, financial motivations
31
Reduce production or distribution costs
 
through economies of scale, vertical integration, the adoption of more efficient production...
32
Financial motivations
 
gain access to underutilized tax shields, avoid bankruptcy costs, increase leverage opportunities,...
33
Retained earnings
 
capital generated from ongoing operations, debt capital provided by banks, customers, and suppliers
34
Business angels
 
wealthy individuals looking to invest in entrepreneurial ventures or venture capital firms
35
Venture capital firms
 
raise money from numerous smaller investors that they then invest in a portfolio of entrepreneurial...
36
Why do bidding firms engage in mergers and acquisitions even though they usually do not generate...
 
to ensure survival, free cash flow, agency problems, managerial hubris, and the potential for...
37
Free cash flow
 
the amount of cash a firm has to invest after all positive net present-value investments in...
38
When is free cash flow created?
 
when a firm's ongoing business operations are very profitable but offer very few opportunities...
39
Event study analysis
 
the most popular way to evaluate the performance effects of acquisitions for bidding firms,...
40
cumulative abnormal return (CAR)
 
any performance greater or less than what was expected in a short period of time around when...
41
Firms have only two investment options:
 
to invest their free  cash flow in strategies that generate competitive parity or in strategies...
42
Mergers and acquisition strategies can benefit managers in two ways:
 
to help diversify their human capital investments in their firm,and to quickly increase from...
43
Managerial Hubris
 
the unrealistic belief held by managers in bidding firms that they can manage the assets of...
44
Market for corporate control
 
the market that is created when multiple firms actively seek to acquire one or several firms
45
An imperfectly competitive market for corporate control can exist when a target is worth more...
 
aware of this additional value
46
Rules for bidding firm managers
 
search for valuable and rare economies of scope, keep information away from other bidders,...
47
Thinly traded market
 
a market where there are only a small number of buyers and sellers, where information about opportunities in...
48
Rules for target firm managers
 
seek information from bidders, invite other bidders to join the bidding competition, and delay...
49
MGMT responses that reduce the wealth of target firm equity holders
 
greenmail, standstill agreements, and poison pills
50
MGMT responses that do not affect the wealth of target firm equity holders
 
shark repellents, Pac Man defense, Crown Jewel Sale, and Lawsuits
51
mGMT responses that increase the wealth of target firm equity holders
 
search for white knights, creation of bidding auctions, and golder parachutes
52
Greenmail
 
a maneuver in which a target firm's management purchase any of the target firm's stock owned...
53
Standstill agreements
 
often negotiated in conjunction with greenmail, a contract between a target and a bidding firm...
54
Poison Pills
 
any variety of actions that target firm managers can take to make the acquisition of the target...
55
Shark Repellents
 
a variety of relatively minor corporate governance changes that is supposed to make it somewhat...
56
Supermajority voting rules
 
more than 50% of the target firm's board of directors must approve a take over and state...
57
Pac Man Defense
 
taking over the firm or firms bidding for them
58
Crown Jewel Sale
 
to prevent an acquisition, the target firm can sell of these crown jewels, either directly...
59
White Knight
 
another bidding firm that agrees to acquire a particular target in the place of the original...
60
Golden Parachute
 
a compensation arrangement between a firm and its senior mgmt team that promises these individuals...
61
Mergers and acquisitions designed to create diversification strategies
 
should be managed through the M-form structure
62
Mergers and acquisitions designed to create vertical integration strategies
 
should be managed through the U-form structure and have mgmt controls and compensation policies...
63
The most significant challenge in integrating bidding and target firms has to do with
 
cultural differences
64
5 dimensions of Culture
 
social orientation- individualism/ collectivismpower orientation- power respect/ power toleranceuncertainty orientation-...


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