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Name:
Class:
Date:
chapter 11
Indicate whether the statement is true or false.
1. Antitrust authorities are more likely to approve acquisitions as opposed to alliances.
a.
True
b.
False
2. If a manager is fueled by hubristic motives for acquisition, she may knowingly overpay for targets.
a.
True
b.
False
3. The worst scenario for the dissolution of an alliance can be described as "death by 1000 cuts".
a.
True
b.
False
4. The second phase in the dissolution of alliances is going public.
a.
True
b.
False
5. Relational capabilities are insignificant in making or breaking alliances.
a.
True
b.
False
6. Equity, learning and experience, nationality, and relational capabilities have each been found to have a direct impact on
alliance performance.
a.
True
b.
False
7. While managing alliances, managers should keep in mind that soft-relationship aspects are secondary to strategic and
organizational fit.
a.
True
b.
False
8. Inadequate screening is a problem which occurs during the pre-acquisition phase of the merger and acquisitions (M&A)
process.
a.
True
b.
False
9. An acquisition is likely to be the largest capital expenditure of a firm, as well as one of its most poorly planned and
executed activities.
a.
True
b.
False
10. In the context of organizing acquisitions, strategic fit refers to the effective matching of complementary strategic
capabilities.
a.
True
b.
False
11. Strategic alliances are voluntary agreements of cooperation between firms.
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chapter 11
a.
True
b.
False
12. Equity, learning and experience, relational capabilities, and organization are the four factors that may influence
alliance performance.
a.
True
b.
False
13. An acquisition is the combination of operations and management of two firms to establish a new legal entity.
a.
True
b.
False
14. If a firm wants to have some direct control over joint activities on a continuing basis, it should choose an equity
relationship over a contractual relationship.
a.
True
b.
False
15. In a three-stage model of alliance formation, firms need to specify a specific format that is either equity based or
contractual (non-equity based) in stage three.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
16. The wind energy company Cloud Sail and the solar energy company Sun Burst recently formed a new legal entity
called Cloud Burst. This action is known as a _____ between the two companies.
a.
Contractual alliance
b.
Equity based alliance
c.
Merger
d.
Acquisition
17. Which of the following approaches does not allow control over joint activities in an alliance?
a.
The joint venture approach
b.
The equity approach
c.
The contractual approach
d.
The cross-shareholding approach
18. Over a period of ten years, Laelle Corp., a technological firm, has acquired 15 companies. All the acquired companies
were high-end technology providers. The company’s intention was to leverage superior resources through these
acquisitions. In this scenario, Laelle Corp.’s acquisitions are driven by a(n) _____.
a.
hubristic motive
b.
environmental motive
c.
synergistic motive
d.
ethical motive
19. Rues and West Bros. manufactures firearms. Since it lacks the skills and high-end technology needed to manufacture
silencers for its firearms, it enters into an alliance with Porben Inc., a company that specializes in manufacturing silencers.
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chapter 11
In order to ensure the optimal utilization of Porben’s technological capabilities, Rues and West Bros. is most likely to
follow the _____ approach.
a.
contractual
b.
equity
c.
turnkey project
d.
licensing
20. The alliance between Nilesmith Corp. and Pentrall Inc. is set to dissolve. Both the companies are engaged in extensive
negotiations with new alliance partners. Which of the following stages of alliance dissolution is shown in the given
scenario?
a.
Going public
b.
Initiation
c.
Uncoupling
d.
Aftermath
21. The party who begins the process of ending an alliance is labeled the _____.
a.
follower
b.
partner
c.
initiator
d.
retractor
22. In the context of acquisition, the only identifiable group of winners is:
a.
the shareholders of target firms.
b.
the shareholders of acquiring firms.
c.
the employees of acquiring firms.
d.
the first line managers of target firms.
23. A(n) _____ is a transfer of the control of operations and management from one firm to another.
a.
strategic investment
b.
equity-based alliance
c.
merger
d.
acquisition
24. _____ refers to a business strategy in which each partner in an alliance holds stock in the other firm.
a.
Acquisition
b.
Strategic investment
c.
Cross-shareholding
d.
Merger
25. In the context of an institution-based view, which of the following is true of managerial motives that drive
acquisitions?
a.
They are a response to formal rules and regulations.
b.
They display herd behavior by chasing fads of acquisitions.
c.
They do not benefit a company overall in the long run.
d.
They cannot simultaneously coexist with hubristic and synergistic motives.
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26. Fly Wagons Inc. and Esca Motors Inc. are competing to acquire Charge Tool Inc., a spark plug manufacturing
company, which is worth $5 million. Esca Motors quotes a bid of $10 million to acquire the company, and Fly Wagons
quotes a bid of $20 million. In this scenario, which of the following approaches should be adopted by Fly Wagons for the
acquisition?
a.
Fly Wagons should submit a bid of $30 million.
b.
Fly Wagons should drop the deal.
c.
Fly Wagons should continue bidding till Esca Motors gives up on Charge Tool.
d.
Fly Wagons should double the bid amount.
27. What is the percentage of acquisitions that reportedly fail?
a.
20%
b.
40%
c.
70%
d.
90%
28. Genra Technologies, a computer manufacturer that specializes in custom-built computers, recently entered into an
agreement with Fronton Corp., a computer hardware manufacturer. According to the agreement, the operations and
management control of Fronton Corp. will be transferred to Genra Technologies. In addition, Fronton Corp. will be a unit
of Genra Technologies. The given scenario is an example of a(n) _____.
a.
strategic investment
b.
contractual alliance
c.
merger
d.
acquisition
29. In the pre-acquisition phase, which of the following must be avoided by an acquirer to reduce the possibility of
acquisition failure?
a.
Adopting a synergistic view
b.
Giving importance to executive hubris
c.
Taking actions to eliminate poor organizational fit
d.
Addressing stakeholders’ concerns
30. In the three-stage model of alliance formation, which of the following is the first stage?
a.
Taking a decision on the mode of growth
b.
Making a choice between a contractual and an equity approach
c.
Selecting an appropriate format to specify the relationship
d.
Taking decisions on strategic and organizational fits
31. Ziff Tech Inc., a technological firm, funds Tictoe Corp., a computer processor designing company, with five percent
of its annual revenue. Which of the following best describes the alliance between Ziff Tech and Tictoe Corp.?
a.
Acquisition
b.
Strategic investment
c.
Cross-shareholding
d.
Merger
32. Formal institutions influence alliances and acquisitions by:
a.
requiring firms to conform to the entry mode requirements.
b.
centering on collective norms, supported by a normative pillar.
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c.
emphasizing internalized values and beliefs, supported by a cognitive pillar.
d.
emphasizing the creation of value.
33. In most of the cases, alliances have emerged as great instruments of real options because they help companies to:
a.
sequentially scale up or scale down their investments.
b.
choose the right partners for future investments.
c.
eradicate potential partner opportunism.
d.
become immune to competition.
34. In the context of organizing acquisitions, _____ is the similarity in culture, systems, and structures between two or
more firms.
a.
strategic fit
b.
organizational fit
c.
relational capability
d.
collaborative capability
35. In the context of an institution-based view, which of the following is true of hubristic motives driving acquisitions?
a.
They are a response to formal institutional constraints and transitions.
b.
They involve the display of herd behavior by chasing fads of acquisitions.
c.
They cause a firm to knowingly overpay for targets.
d.
They focus on leveraging superior resources.
36. _____ are based on ownership or financial interest between firms.
a.
Contractual alliances
b.
Equity-based alliances
c.
Acquisitions
d.
Mergers
37. Which of the following is true of relational capabilities while managing interfirm relationships?
a.
They emphasize competition rather than collaboration.
b.
They foster potential partner opportunism.
c.
They are covered in the traditional business school curriculum.
d.
They are rarely found in managers involved in alliances.
38. Informal institutions affect the formation of alliances and acquisitions by:
a.
imposing entry mode requirements.
b.
centering on collective norms, supported by a normative pillar.
c.
involving antitrust authorities to monitor the market.
d.
discouraging acquisitions.
39. A strain between Firm A (an American company) and Firm B (a Saudi Arabian company) was created when Firm B
asked the female executives of Firm A to wear headscarves during meetings. Which factor influencing alliance
performance is this an example of?
a.
Hubristic motivation
b.
Strategic planning
c.
Relational capacities
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chapter 11
d.
Nationality
40. According to an institution-based view, which of the following is true of synergistic motives that drive acquisitions?
a.
They are a response to formal institutional constraints and transitions.
b.
They cannot coexist with managerial and hubristic motives.
c.
They portray self-interested actions guided by informal norms and values.
d.
They portray overconfidence in one’s capability.
41. _____ are associations between firms that are based on contracts and do not involve the sharing of ownership.
a.
Non-equity-based alliances
b.
Acquisitions
c.
Equity-based alliances
d.
Competitive alliances
42. Arc Corp., a consumer goods manufacturer in Lumeria, proposed to merge with Borton Inc., a consumer goods
manufacturer in Arkadas. Arc Corp. cleared the antitrust scrutiny in Lumeria but failed to anticipate a rigorous antitrust
scrutiny in Arkadas. As a result, the merger never took place. In this scenario, which of the following is most likely the
reason for the failure of the merger?
a.
The firms neglected the influence of informal institutions on the merger.
b.
The firms neglected the influence of formal institutions on the merger.
c.
The firms gave excessive importance to soft relational capabilities.
d.
The firms overpaid for their targets.
43. Firm A has a very laissez-faire culture of dress and work hours, while Firm B is very regulated and strict in those
areas. This difference may prove to be a challenge in which aspect of forming an alliance?
a.
Strategic fit
b.
Organizational fit
c.
Relational capability
d.
Collaborative capability
44. When two firms combine to establish a new legal entity, it is known as a(n) ______.
a.
Merger
b.
Strategic investment
c.
Contractual alliance
d.
Acquisition
45. Ocan Foods Inc., a food and beverage retailer, invests ten percent of its annual revenue in Bright Diaries Inc., a diary
manufacturer. Bright Diaries, on the other hand, invests 15 percent of its annual revenue in Ocan Foods. Which of the
following equity-based alliances is shown in the given scenario?
a.
Acquisition
b.
Contractual alliance
c.
Cross-shareholding
d.
Merger
46. In the context of real options, which of the following is a disadvantage of entering into alliances?
a.
Investments are unlikely to be modified.
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b.
Firms are most likely to choose the wrong partners.
c.
Alliances with other firms are most likely to fail.
d.
Entering into alliances is very costly.
47. According to the hubristic motive, a winning acquirer may suffer from what is called the ’’winner’s curse’’ when:
a.
the market price of target firms do not reflect their intrinsic value.
b.
multiple firms are bidding for multiple targets.
c.
the winner has overpaid during an acquisition.
d.
the winner has not paid the acquisition premium.
48. In the context of cross-border mergers and acquisitions (M&As), which of the following statements is true?
a.
There are no cultural differences if both sides are from the same continent.
b.
They do not involve major problems at the employee level.
c.
There are integration difficulties due to clashes of organizational and national cultures.
d.
They fail only because of poor strategic fit.
49. A _____ is an investment in real operations as opposed to financial capital.
a.
real unit
b.
real option
c.
real acquisition
d.
real expense
50. In the post-acquisition phase, which of the following problems is specific to cross-border mergers and acquisitions?
a.
Nationalistic firm-level concerns over foreign takeovers
b.
Nationalistic media-level concerns against foreign takeovers
c.
Lack of familiarity with foreign business systems
d.
Lack of familiarity with foreign culture
51. Discuss four factors that may influence alliance performance.
52. Explain the importance of organization in an acquisition.
53. Explain the three-stage model in the formations of alliances.
54. Discuss the implications of actions that determine the success and failure in alliances and acquisitions.
55. Discuss the problems that occur in the pre-acquisition and post-acquisition phases of acquisitions.
56. Explain how formal institutions affect alliances and acquisitions.
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chapter 11
Answer Key
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chapter 11
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chapter 11
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chapter 11
