Mergers and Acquisitions Questions and Answers

Answer: C

Correct answer: I and III only

Daimler-Benz and Chrysler were both motor manufacturers, so the merger was horizontal; and Daimler was German while Chrysler was American, so it was also cross-border. Both descriptions apply at once, which is why the answer combines them. It was certainly not vertical or conglomerate, the two firms making the same kind of product.

Answer: C

Correct answer: I, II, and III only

All three descriptions fit. BP was British and Amoco American, making it cross-border; both were oil companies at the same stage of the industry, making it horizontal; and the stated rationale was the cost saving available from combining overlapping operations, which is economies of scale. Horizontal mergers between large firms in the same industry are precisely where scale economies are expected.

Answer: C

Correct answer: $102

Paying cash, A’s share count is unchanged at 100. Its value becomes its own $10,000, plus B’s $1,600, plus the $600 synergy, less the $2,000 paid out - that is $10,200. Dividing by 100 shares gives $102, a rise of exactly the $200 NPV spread over the existing shares.