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All 40 Flashcards — Mergers and acquisitions
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Question
What is a merger?
Answer
When two businesses agree to combine into one new entity (typically of similar size).
💡 Hint
Merger = agreed combination.
Question
Give one reason why a business might acquire a competitor.
Answer
To increase market share quickly and reduce competition.
💡 Hint
Buy competitor = more share.
Question
What is “culture clash” in M&A?
Answer
When employees from two firms have different values/ways of working, causing conflict and lower productivity.
💡 Hint
People problems kill deals.
Question
Fill the gap: Merger = agreed combination of ______.
Answer
Equals (similar-sized firms).
💡 Hint
Merger = “equals”.
Question
In a merger, what must usually happen before it goes ahead?
Answer
Both sets of shareholders must approve the merger.
💡 Hint
Shareholder approval matters.
Question
How can M&A help a business enter a new geographic market?
Answer
By buying a local firm with existing customers, premises and distribution.
💡 Hint
Buy local access.
Question
Why might regulators block a merger or acquisition?
Answer
Competition authorities may block deals that reduce competition too much (creating monopoly power).
💡 Hint
Too much market power = blocked.
Question
Name one benefit of M&A and one risk of M&A.
Answer
Benefit: speed/market share/economies of scale. Risk: culture clash/integration/high cost.
💡 Hint
Always balance pros and cons.
Question
Why can redundancies be a problem after an acquisition?
Answer
Duplicate roles may lead to job losses, damaging morale, reputation, and community relations.
💡 Hint
Job cuts = morale + PR risk.
Question
What does “eliminate competition” mean as a reason for acquisitions?
Answer
Buying a rival removes them from the market, potentially increasing pricing power.
💡 Hint
Less rivalry = more power.
Question
What is an acquisition (takeover)?
Answer
When one business buys another and takes control (can be friendly or hostile).
💡 Hint
Acquisition = one buys another.
Question
Fill the gap: Acquisition = one firm ______ another.
Answer
Buys (and takes control of).
💡 Hint
Acquisition = buy control.
Question
How can M&A create economies of scale?
Answer
By combining operations to lower average costs (bulk buying, shared facilities, shared admin).
💡 Hint
Combine = lower unit costs.
Question
True/False: A takeover can be friendly or hostile.
Answer
True — it depends whether the target agrees.
💡 Hint
Friendly vs hostile.
Question
In an acquisition, who ends up in control?
Answer
The acquiring company gains control of the target.
💡 Hint
Buyer controls target.
Question
Why can debt-funded acquisitions be risky?
Answer
Interest payments increase fixed costs and can create cash flow problems if performance falls.
💡 Hint
Debt increases pressure.
Question
What is a common operational risk after M&A?
Answer
Disruption while integrating systems and processes can reduce service quality or output temporarily.
💡 Hint
Integration disrupts operations.
Question
What is the “core” meaning of synergy?
Answer
The combined firm should create extra value compared with operating separately.
💡 Hint
Extra value from combining.
Question
Name two common reasons for M&A.
Answer
Economies of scale and increased market share (also: diversification, speed, resources).
💡 Hint
Reasons: scale + share.
Question
Why might a firm acquire technology via M&A instead of developing it?
Answer
It can be faster and reduce uncertainty compared to in-house R&D.
💡 Hint
Buy innovation fast.
Question
What are “integration difficulties” in M&A?
Answer
Problems combining IT systems, processes, supply chains and management structures (often costly and slow).
💡 Hint
Integration is hard + expensive.
Question
Why might a business use M&A for speed?
Answer
M&A is faster than organic growth for entering markets or gaining capabilities.
💡 Hint
Speed is a key advantage.
Question
What does “hostile takeover” mean?
Answer
The target company resists the takeover, but the buyer tries to gain control anyway (often by appealing to shareholders).
💡 Hint
Hostile = target resists.
Question
What is a “friendly” takeover?
Answer
The target company agrees to the purchase and cooperates with the buyer.
💡 Hint
Friendly = agreed.
Question
How does M&A support diversification?
Answer
It lets a business enter new products or markets, spreading risk if one market declines.
💡 Hint
Diversify = spread risk.
Question
Why is “high cost” a risk in acquisitions?
Answer
They often require large funding (sometimes debt), increasing interest costs and financial risk.
💡 Hint
Big price tag = higher risk.
Question
Name two common risks of M&A.
Answer
Culture clash and integration difficulties (also: redundancies, high cost, regulation).
💡 Hint
Risks: people + systems.
Question
After an acquisition, what might happen to the acquired firm’s brand/name?
Answer
It may keep its name or be absorbed/rebranded by the buyer.
💡 Hint
Brand may stay or change.
Question
How can M&A improve distribution and sales reach?
Answer
The buyer gains the target’s distribution channels, retail presence or customer base.
💡 Hint
Distribution is an asset.
Question
Which is usually more expensive upfront: M&A or organic growth?
Answer
M&A is usually more expensive upfront because it involves buying an existing firm.
💡 Hint
Purchase price is big.
Question
Why do buyers often pay a “premium” in an acquisition?
Answer
To persuade shareholders to sell by offering more than the current market price.
💡 Hint
Premium = incentive to sell.
Question
Why can M&A reduce staff motivation?
Answer
Uncertainty about redundancies and new management can increase anxiety and reduce engagement.
💡 Hint
Uncertainty hurts morale.
Question
Exam comparison: Which is usually faster — organic growth or M&A?
Answer
M&A is usually faster (but higher risk/cost).
💡 Hint
Speed vs risk trade-off.
Question
One-line exam rule for M&A evaluation answers?
Answer
State a benefit, state a risk, apply both to the case, then judge which is stronger.
💡 Hint
Balance + apply + judge.
Question
What does “failure to achieve synergies” mean?
Answer
The expected cost savings or revenue gains do not happen, so the deal underperforms.
💡 Hint
Synergy is not guaranteed.
Question
Exam comparison: name two dimensions to compare organic growth vs M&A.
Answer
Speed and risk (also: cost and control).
💡 Hint
Compare on 4: speed/risk/cost/control.
Question
What are “synergies” in mergers and acquisitions?
Answer
When the combined business is worth more than the two businesses separately (e.g. cost savings or higher revenues).
💡 Hint
Synergy = 1 + 1 > 2.
Question
What is a “strategic defence” reason for M&A?
Answer
Buying a target to prevent competitors acquiring it first and gaining an advantage.
💡 Hint
Buy to block rivals.
Question
What does “access to resources” mean as a reason for M&A?
Answer
Buying a firm for its technology, patents, skilled staff, brand, or distribution network.
💡 Hint
Acquire capabilities fast.
Question
Why is the line between “merger” and “acquisition” sometimes blurry in reality?
Answer
Because one partner is often dominant, even if the deal is labelled a merger.
💡 Hint
“Merger” can be PR.
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Growth and evolution
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