Mergers and Takeovers Quiz

What is a takeover?

• A business acquiring control of another business

• A merger of two previously separate firms

• A combination of two existing businesses into a new firm

• An acquisition of intangible assets

Which of the following is a possible reason for takeovers?

• Increase market share

• Eliminate competition

• Secure better distribution

• All of the above

What are the drawbacks of takeovers?

• High cost involved

• Problems of integration

• Resistance from employees

• All of the above

What is the main reason for preferring takeovers?

• Existing products are in the later stages of their life cycles

• Business lacks knowledge or resources to develop organically

• Speed of growth is a high priority

• Competitors enjoy significant advantages

What are common reasons why takeovers fail?

• Price paid for takeover was too high

• Cultural incompatibility between the two businesses

• Loss of key personnel & customers post acquisition

• All of the above

What is the direction of integration in a forward vertical integration?

• Acquiring a business further up in the supply chain

• Acquiring a business operating earlier in the supply chain

• Acquiring a business at the same stage of the supply chain

• Acquiring a business with no clear connection

What are the potential benefits of horizontal integration?

• Achieve economies of scale

• Reduces competition by removing key rivals

• Buying an existing and well-known brand can be cheaper

• All of the above

Which of the following is an example of horizontal integration?

• UK DIY chain Homebase sold to Australian retail giant Wesfarmers

• Apple buys Star Wars motion-capture company Faceshift

• Dell makes $67bn bet on EMC in tech history's largest acquisition

• Booker given green light for takeover deal worth £40m of Budgens and Londis grocery chains

What are the potential benefits of vertical integration?

• Enables a business to capture a greater share of the profit on each sale

• Secures important sources of supply or distribution

• Create a barrier to entry to potential new competitors

• All of the above

Which of the following is an example of vertical integration?

• British Airways and Iberia merge to form IAG

• Glaxo Wellcome plc and SmithKline Beecham plc merge to form GSK plc

• Paddy Power and Betfair merge to form Paddy Power Betfair

• Apple buys Star Wars motion-capture company Faceshift