1.Which of the following motives for mergers does NOT make economic sense?

A)   Surplus funds and vertical integration.

B)   Economies of scale and reduced borrowing costs.

C)   Diversification and reduced borrowing costs.

D)   Complementary resources and eliminating inefficiencies.

2.Which of the following is NOT a criticism of merging purely for diversification purposes?

A)   Increasing the size of the firm helps provide job security for management.

B)   Shareholders can diversify more easily themselves.

C)   Empirical evidence finds a diversification discount to conglomerates.

D)   Diversification does not increase the overall value of the company.

3.Achieving international business objectives is sometimes used as the rationale for a merger. Which of the following are least likely to be valid objectives that can be realized from a cross-border merger? The merger:

A)   provides the ability to work around trade barriers.

B)   gives the acquiring firm the ability to use technology in new markets.

C)   results in better support for current international clients.

D)   achieves a reduction in exchange rate exposure.

4.Merger synergies are usually realized from:

A)   merger tax benefits.

B)   decreasing costs and/or increasing revenues.

C)   increasing market share.

D)   bootstrapping earnings per share.

5.Which of the following statements concerning M&A activity is most accurate? Mergers based upon a desire to diversify usually do:

A)   make sense from the shareholders’ standpoint, and also usually make sense from the management’s standpoint.

B)   not make sense from the shareholders’ standpoint, but may make sense from the management’s standpoint.

C)   not make sense from the management’s standpoint, but usually do make sense from the shareholders’ standpoint.

D)   not make sense from the shareholders’ standpoint, and do not make sense from the management’s standpoint.

答案和详解如下：

1.Which of the following motives for mergers does NOT make economic sense?

A)   Surplus funds and vertical integration.

B)   Economies of scale and reduced borrowing costs.

C)   Diversification and reduced borrowing costs.

D)   Complementary resources and eliminating inefficiencies.

The correct answer was C)

Diversification does not make economic sense for company shareholders. It is much easier and cheaper for the shareholders to diversify simply by investing in the shares of unrelated companies themselves rather than expend the time and resources necessary to go through a merger. Similarly, merging to simply reduce financing costs is a misplaced argument since the lower cost of debt financing arises because of the greater security afforded bondholders.

2.Which of the following is NOT a criticism of merging purely for diversification purposes?

A)   Increasing the size of the firm helps provide job security for management.

B)   Shareholders can diversify more easily themselves.

C)   Empirical evidence finds a diversification discount to conglomerates.

D)   Diversification does not increase the overall value of the company.

The correct answer was A)

Increasing the size of the firm does not necessarily benefit shareholders, but it would not be considered a valid criticism. Increasing the size of the firm is a potential benefit for managers because diversification reduces the threat of a takeover, and helps management further secure their employment. The other reasons stated are all valid criticisms of a diversification merger.

3.Achieving international business objectives is sometimes used as the rationale for a merger. Which of the following are least likely to be valid objectives that can be realized from a cross-border merger? The merger:

A)   provides the ability to work around trade barriers.

B)   gives the acquiring firm the ability to use technology in new markets.

C)   results in better support for current international clients.

D)   achieves a reduction in exchange rate exposure.

The correct answer was D)

In general, a cross-border merger is likely to increase the acquiring firm’s exchange rate exposure. All of the other statements are valid arguments in support of a cross-border merger.

4.Merger synergies are usually realized from:

A)   merger tax benefits.

B)   decreasing costs and/or increasing revenues.

C)   increasing market share.

D)   bootstrapping earnings per share.

The correct answer was B)

The existence of synergies typically result in decreases in costs for the combined firm (e.g., the same distribution network can support both firms’ retail networks) and/or an increase in revenues (e.g., by cross-selling product lines). The other responses are motivations for M&A activities, but do not result from the realization of synergies.

5.Which of the following statements concerning M&A activity is most accurate? Mergers based upon a desire to diversify usually do:

A)   make sense from the shareholders’ standpoint, and also usually make sense from the management’s standpoint.

B)   not make sense from the shareholders’ standpoint, but may make sense from the management’s standpoint.

C)   not make sense from the management’s standpoint, but usually do make sense from the shareholders’ standpoint.

D)   not make sense from the shareholders’ standpoint, and do not make sense from the management’s standpoint.

The correct answer was B)

Mergers predicated upon the need to diversify are usually not sensible from the shareholders’ perspective, because they can easily diversify their investments by holding shares in multiple firms. Such mergers may make sense for management, because compensation is often positively correlated with firm size.