External Growth In Business: Mergers And Takeovers Quiz

2.

What is the dominant feature of a merger?

A minimum of two companies agreeing to join together to work with each other as a team and share resources as one large company.
One company buying control of another to have complete power over the new entity.
A takeover that company management tries to block by persuading its shareholders not to sell.

Correct Answer

A. A minimum of two companies agreeing to join together to work with each other as a team and share resources as one large company.

Explanation

A merger is characterized by a minimum of two companies agreeing to come together and collaborate as a unified entity, pooling their resources and working as a team. This implies that the companies involved are willing partners in the merger process, with the intention of combining their operations and forming a larger organization. It does not involve one company exerting complete control over another or a takeover attempt that management tries to prevent.

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3.

What is the dominant feature of a takeover?

A minimum of two companies agreeing to join together to work with each other as a team and share resources as one large company.
One company buying control of another to have complete power over the new entity.
A takeover that company management tries to block by persuading its shareholders not to sell.

Correct Answer

A. One company buying control of another to have complete power over the new entity.

Explanation

The dominant feature of a takeover is when one company buys control of another in order to have complete power over the new entity. This involves acquiring a majority stake or ownership in the target company, allowing the acquiring company to make decisions and control the operations of the acquired company. This type of takeover typically results in the acquiring company gaining control over the target company's assets, resources, and decision-making processes.

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1

4.

What are the benefits of a merger? [there is more than one answer]

Combined premises
New premises
Combined equipment
New equipment
Combined products
New products
Combined staff
New staff

Correct Answer(s)

A. Combined premises
A. Combined equipment
A. Combined products
A. Combined staff

Explanation

A merger can bring several benefits, including combined premises, equipment, products, and staff. By combining premises, the merged company can potentially reduce costs and optimize resources. Combined equipment can lead to increased efficiency and productivity. The merger can also result in a wider range of combined products, which can attract more customers and increase market share. Additionally, combining staff can result in a larger talent pool and expertise, leading to improved innovation and problem-solving capabilities.

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5.

What are the benefits of a takeover? [there is more than one answer]

Combined premises
New premises
Combined equipment
New equipment
Combined products
New products
Combined staff
New staff

Correct Answer(s)

A. New premises
A. New equipment
A. New products
A. New staff

Explanation

A takeover can bring several benefits, including new premises, equipment, products, and staff. By acquiring another company, a business can gain access to new physical locations, which may expand its reach and customer base. Additionally, the takeover may provide the opportunity to acquire new equipment, which can improve efficiency and productivity. The merged companies can also bring together their product portfolios, allowing for a wider range of offerings and potentially increasing market share. Lastly, a takeover can bring new staff members with different skills and expertise, enhancing the overall capabilities of the organization.

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6.

Did Exxon and Mobil have a successful merger in 1999?

True
False

Correct Answer

A. True

Explanation

Exxon and Mobil (1999)

This US$81 Billion merger of oil giants not only created the world’s biggest company but reunited the two arms of John D Rockefeller’s Standard Oil Co., which was set up in the 19th Century before being split and eventually becoming Exxon and Mobil respectively. It is now consistently one of the most profitable companies in the world.

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3

7.

Did Daimler-Benz and Chrysler have a successful merger in 1998?

True
False

Correct Answer

A. False

Explanation

German auto giant Daimler-Benz aimed to create one of the biggest car groups in history by pumping US$40 Billion of investment into Detroit car firm Chrysler. However, cultural clashes and differing priorities between the maker of Mercedes luxury vehicles and the value-focused American brand eventually saw Daimler-Benz sell its interest on for only US$6 Billion.

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8.

What was considered one of the worst amicable [friendly] takeovers in history?

Kraft Foods’ takeover of Cadbury in 2009.
Royal Bank of Scotland's takeover of ABN Amro in 2007.
Exxon and Mobil in 1999.
Daimler-Benz and Chrysler in 1998.

Correct Answer

A. Royal Bank of Scotland's takeover of ABN Amro in 2007.

Explanation

Royal Bank of Scotland consortium’s amicable takeover of ABN Amro (2007) Widely considered one of the worst M&As (merger and acquisitions) in history, the 71 Billion Euro purchase of giant Dutch bank ABN Amro by a consortium [combination] of banks led by RBS was three times more than the company’s estimated value, and came on the eve of the global financial crisis. Since then, RBS has had to be bailed out twice by the British Government.

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9.

What are the advantages of merging with or taking over another business?

Respect.
Free Sky TV.
Cheaper Costs.
Destroy Competition.
Tuck Shop Vouchers.
One Direction.
Speed.

Correct Answer(s)

A. Cheaper Costs.
A. Destroy Competition.
A. Speed.

Explanation

Speed

When speed is of the essence, a merger or acquisition can be the order of the day. This is because whatever assets you need, be they factories or staff, can be bought a lot quicker than they can be built.

Cheaper Costs

Why buy an asset such as a manufacturing plant when it would be cheaper to buy the majority of shares for the company itself? This often becomes an opportunity when a publicly held company’s poor performance cheapens the share price.

Destroy Competition

Taking over or merging with the competition can nullify [cancel out] a rival threat (boosting sales), create access to their brands and products, and increase the loyalty of customers to your own brand at the same time.

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10.

What are the benefits of growth for the company? [there is more than one answer]

Higher Profits
More Products.
Better Economies of Scale.
Market Power.
Lower Prices.
More Employment.
Better Services.
Lowered Risk.
Supplier Control.

Correct Answer(s)

A. Higher Profits
A. Better Economies of Scale.
A. Market Power.
A. Lowered Risk.

11.

What are the benefits of growth for society? [there is more than one answer]

More Products.
Higher Profits.
Better Economies of Scale.
Market Power.
Lowered Risk.
Supplier Control.
Lower Prices.
More Employment.
Better Services.

Correct Answer(s)

A. More Products.
A. Lower Prices.
A. More Employment.
A. Better Services.

Explanation

Growth benefits society by providing more products, which leads to a wider range of choices and improved quality of life. Lower prices are also a benefit as growth often leads to increased competition, resulting in more affordable goods and services for consumers. More employment opportunities are created as businesses expand, leading to reduced unemployment rates and improved economic stability. Additionally, growth allows for better services to be offered, as companies have the resources to invest in research, development, and innovation to meet the evolving needs of society.

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External Growth In Business: Mergers And Takeovers Quiz

What is a merger also commonly known as?

Quiz Preview

What is the dominant feature of a merger?

What is the dominant feature of a takeover?

What are the benefits of a merger? [there is more than one answer]

What are the benefits of a takeover? [there is more than one answer]

Did Exxon and Mobil have a successful merger in 1999?

Did Daimler-Benz and Chrysler have a successful merger in 1998?

What was considered one of the worst amicable [friendly] takeovers in history?

What are the advantages of merging with or taking over another business?

What are the benefits of growth for the company? [there is more than one answer]

What are the benefits of growth for society? [there is more than one answer]