TESTBANK: CHAPTER 15
External Growth Strategies: Mergers, Acquisitions, and Alliances
True/False Questions
1. Internal business venture rather than external mergers, acquisitions and alliances is the preferred means
by which most established firms achieve major extensions in the scope of their activities.
[See p.390]
2. Mergers, acquisitions, and alliances may be viewed not just as instruments of corporate strategy but as
strategies in themselves.
[See p.390]
3. The key difference between a merger and an acquisition is that, in the case of a merger, the participating
companies combine to create a new company.
[See p.391]
4. In the case of cross-border amalgamations of companies, concerns of national domination often mean
that mergers are preferred to acquisitions.
[See p.391]
5. Mergers and acquisitions go in waves. Because acquirers prefer to pay low prices for acquired
companies, these M&A waves tend to be inversely correlated with stock market fluctuations.
[See p.292]
6. The speed at which many decisions over corporate acquisitions are made as contributed to the
disappointing outcomes of most mergers and acquisitions.
[See pp.394-397]
7. In the automobile and beer industries, acquisitions have been motivated primarily by the goal of
international expansion.
[See p.399]
8. The only clear finding from several decades of empirical research into the outcomes of mergers and
acquisitions is that the shareholders of the acquiring firms lose money.
[See p.400
9. Identifying the strategic rationale and likely benefits of mergers and acquisitions is easier in the case of
diversifying mergers and acquisitions than for horizontal mergers and acquisitions.
[See p.401
10. In order to gain a new organizational capability, it is usually cheaper and less risky to acquire a
company that already possesses that capability than to develop that capability internally.
[See p.397]
11. The “lemons problem” in the market for companies refers to the fact that the sellers of companies have
better information about the company than do would-be buyers.
[See p.398]
12. Cross-border acquisitions tend to have the strongest strategic logic, but give rise to the greatest
challenges of post-merger integration.
[See p.398]
13. Issues of pre-acquisition planning and post-acquisition management should be viewed as separate:
activities best led by separate teams.
[See pp.398-399]
14. The key lesson to be drawn from the failures that Hewlett-Packard has experienced in acquiring
software and services companies EDS and Autonomy is that acquisitions that aim to change a company’s
business model are more risky than acquisitions that seek to leverage the existing business model.
[See p.399]
15. The concentration of Hollywood film industry in Los Angeles and electronics and IT companies in
Silicon Valley is for different reasons than those which created the industrial districts of Italy.
[See p.401]
16. In most cases, the primary goal of a strategic alliance is to acquire that than simply to access the
partner’s organizational capabilities.
[See p.402]
17. An important lesson from the troubled development of Boeing’s 787 Dreamliner is that, for developing
complex, technically-advanced products, the hub firm needs to have the capability to manage networks of
strategic alliances.
[See p.403]
18. In Capron and Mitchell’s decision framework for selecting the right growth path, if a firm finds that its
resources and capabilities do not fit with its current strategy, then acquisition should be first option
considered and internal development the last option.
[See pp.404-405]
Multiple Choice Questions
19. Mergers and acquisitions represent paradoxes in the sense that:
[See pp.390-394]
20. Most of the biggest mergers and acquisitions since 2000 have been horizontal—i.e. between companies
in the same industry. This reflects the fact that:
[See p.393]
21. The transformations of:
• South African Breweries into SAB Miller, the world’s second biggest beer company,
• North Carolina National Bank into Bank of America Corporation, the #2 bank in the US
• Comcast into the world’s biggest media company
Are evidence of:
[See p.392-394]
22. The fact that acquisitions impose substantial costs on acquiring firms (including both the acquisition
premium and legal and advisory fees) implies that:
[See pp.393-395]
23. Reckitt Benckiser’s multiple acquisitions of consumer products companies have been motivated by its
quest for:
[See p.397]
24. In technology-based industries, the most common reason for established companies to acquire small,
start-up firms is in order to:
[See p.397]
25. The wave of mergers and acquisitions in the beer industry that have created giants such as Anheuser
Busch Inbev, SAB Miller and Heineken have been motivated primarily by the desire to:
[See pp.396-397]
26. Acquisition is the preferred mode of diversification for most firms because:
[See p.397]
27. The continuing popularity of mergers and acquisitions among companies despite the lack of empirical
evidence of their benefits suggests:
[See pp.395-396]
28. Acquiring companies often pay excessive prices to acquire target companies because:
[See pp.393-394]
29. For acquiring firms, empirical studies show that, on average, the returns to shareholders are:
[See p.393-394]
30. The main reason that empirical evidence of shareholder returns fails to provide conclusive evidence on
the performance outcomes of mergers and acquisition is that:
[See pp.393-394]
31. Which are the following statements about pre-merger planning is untrue?
[See p. 398]
32. Which of the following was not a contributory factor to the success of Disney’s post-acquisition
integration of Pixar?
[See p.400]
33. What distinguishes a joint venture from other types of strategic alliance is that in a joint venture:
[See p.401]
34. The main reason that a strategic alliance is often an attractive alternative to a merger or acquisition is:
[See pp.402-403]
35. Strategic alliances frequently play an important role in a firm’s internationalization strategy because:
[See p.405
36. Compared to alliances between domestic partners, international alliances typically offer:
[See pp.405-406]