Strategic Management
Question Bank
Course Introduction
Strategic Management is a comprehensive course that examines the formulation, implementation, and evaluation of organizational strategies to achieve long-term goals and maintain a competitive edge in dynamic environments. Students will explore key concepts such as external and internal analysis, competitive advantage, industry dynamics, corporate governance, and strategic leadership. Through case studies and real-world examples, the course develops critical thinking and decision-making skills, equipping participants with the tools necessary to assess business situations, craft effective strategies, and drive organizational success in complex and rapidly changing markets.
Recommended Textbook
Mergers Acquisitions and Corporate Restructurings 6th Edition by Patrick A. Gaughan
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Chapter 1: Introduction
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Q1) In a de facto merger:
A)Bidders may be able to avoid all of the target's liabilities
B)Bidders own at least 30% of the target's stock
C)Only California law applies
D)The bidder is considered to have acquired the target even if no formal acquisition took place
True or False
Answer: D
Q2) With an SPAC bidding shareholders are quite familiar with the target to be acquired when they purchase the SPAC's shares in its IPO.
A)True
B)False
Answer: False
Q3) Contingent value rights may provide some guarantee if the acquirer's shares fall below some level.
A)True
B)False
Answer: True
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Chapter 2: History of Mergers
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Q1) LBOs became increasingly popular during the fourth merger wave.
A)True
B)False Answer: True
Q2) The 1940s were a period of intense M&A activity.
A)True
B)False Answer: False
Q3) The first merger wave was significantly curtailed by the Sherman Antitrust Act.
A)True
B)False Answer: False
Q4) Investment bankers played a pivotal role in leading many of the deals that took place in the fourth merger wave.
A)True
B)False Answer: True
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Chapter 3: Legal Framework
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Q1) In the United States when a company makes a bid directly to a target company's shareholders, it must file what form?
A)Schedule 14G
B)Schedule 13D
C)Schedule TO
D)It does not have to file any forms until after the deal is completed
Answer: C
Q2) In the United States target shareholders must have at least what time period to consider the original bids in cases when there is a competing tender offer?
A)10 days
B)5 days
C)2 days
D)One month
Answer: A
Q3) The European Union has finally adopted one consistent set of takeover rules which all members must abide by.
A)True
B)False
Answer: False
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Chapter 4: Merger Strategy
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Q1) Vivendi under Meissier is a good example of a hubris-related M&A program.
A)True
B)False
Q2) The Merck-Medco deal is an example of related diversification.
A)True
B)False
Q3) Doukas and Travlos found that, unlike many domestic acquisitions, acquirers enjoyed positive (although not statistically significant)) returns when they acquired targets in countries in which they did not previously have operations.
A)True
B)False
Q4) Improved R&D is a common motive for deals in the airline industry.
A)True
B)False
Q5) Wachovia's acquisition of Golden West Financial provided significant economies of scope which enabled the bank to show steady profits even during the subprime crisis.
A)True
B)False
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Chapter 5: Antitakeover Measures
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Q1) Morck, Shleifer, and Vishny found that with higher share ownership by management there tends to be:
A)More antitakeover defense
B)Higher Tobin q's
C)Lower shareholder values
D)None of the above
Q2) Which of the following are usually considered active antitakeover measures?
A)Greenmail
B)Poison pills
C)Corporate charter amendments
D)All of the above
Q3) Jarrell found that litigation can increase shareholder value through facilitating auctions.
A)True
B)False
Q4) The use of greenmail has:
A)Gone up in the 2000s
B)Has steadily declined and is not common today
C)Is used mainly when the raider is a hedge fund
D)Is used mainly when the raider is a private equity fund
Page 7
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Chapter 6: Takeover Tactics
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Q1) Research shows that bypass offers tend to have:
A)Higher takeover premiums
B)Lower takeover premiums
C)No impact on takeover premiums
D)None of these
Q2) Which of the following professionals are often members of a bidder's tender offer team?
A)Lawyers
B)Investment bankers
C)Accountants
D)All of the above
Q3) In a bear hug the bidder makes an overture directly to the target company's shareholders.
A)True
B)False
Q4) Borstadt and Swirlein shows the dissidents were successful in their proxy fights
A)Most of the time
B)No consistent pattern
C)42% of the time
D)Almost 80% of the time
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Chapter 7: Hedge Funds As Activist Investors
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Q1) Which of the following may be a valid criticism of activist hedge funds?
A)May cause target firms to be too short-term oriented
B)Tend to reduce target financial performance
C)Often fail to yield positive returns for investors
D)All of the above
E)None of the above
Q2) Research, such as the work of Huang, found that companies which had activists in their shareholder base tended to receive higher takeover premiums when they are sold.
A)True
B)False
Q3) Which of the following is true?
A)Hedge funds tend to facilitate more M&As
B)Hedge funds tend to have a dampening effect on M&As
C)Hedge funds are neutral as it relates to M&A activity
D)None of the above
Q4) Research, such as the work of Clifford, has established that when activists establish share position in target shareholder wealth declines.
A)True
B)False
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Chapter 8: Going-Private Transactions and Leveraged Buyouts
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Q1) The first LBOs occurred in the fourth merger wave.
A)True
B)False
Q2) A study by Travlos and Cornett shows a statistically significant negative correlation between abnormal returns to shareholders and the P/E ratio of the rm relative to the industry
A)True
B)False
Q3) Which of the following firms were or are considered "LBO firms"?
A)KKR
B)Forstmann Little
C)Blackstone Group
D)All of the above
E)None of the above
Q4) Lehan and Poulson showed that buyout premiums were unrelated to the target's free cash flows.
A)True
B)False
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Chapter 9: The Private Equity Market
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Q1) Glode and Green theorize that the findings of Kaplan and Schoar may be due to insufficient disclosure by private equity firms.
A)True
B)False
Q2) Carried interest refers to the gains on transactions by private equity firms.
A)True
B)False
Q3) Which of the following is a way that private equity firms can extract money from the targets they take over:
A)LBOs
B)Dividend recapitalizations
C)Additional acquisitions
D)All of the above
E)None of the above
Q4) Phalippou and Gottschalg analyzed the same return data as Kaplan and Schoar but found that private equity returns trailed the S&P 500 when unexited deals were taken into account.
A)True
B)False
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Chapter 10: The Junk Bond and the Leveraged Loan Market and
Stapled Financing
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Q1) Witmore's research implied that the Asquith et al.study may have greatly overestimated the risk of high yield bonds.
A)True
B)False
Q2) The original issue high-yield bond market got its start in the late 1970s.
A)True
B)False
Q3) Highly confident letters can allow small bidders to make bids for large targets.
A)True
B)False
Q4) Altman and Namacher found the following historical average default rates applied to high-yield bonds: j.
A)5% k.
B)2% l.
C)10% m.
D)none of these
Q5) The fallout from the S&L crisis caused the market supply of high-yield bonds to sharply rise.
A)True
B)False
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Chapter 11: Corporate Restructuring
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Q1) Which of the following studies showed positive shareholder wealth effects for sell-offs?
A)Cusatis, Miles, and Wooldridge
B)JP Morgan
C)Kudla and McInish
D)All of the above
E)Both a and c
Q2) Which of the following are examples of pension-related employee benefit plans?
A)Defined benefit
B)Defined contribution
C)Profit sharing
D)All of the above
Q3) Involuntary divestitures generally have what effects?
A)Positive
B)Negative
C)No consistent effects
D)None of the above
Q4) Cash flow needs motivated the sell-off of Hertz by GM.
A)True
B)False
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Chapter 12: Restructuring in Bankruptcy
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Q1) The debtor in possession is another name for the bankrupt company.
A)True
B)False
Q2) Denis and Denis show that while poor deal pricing was a factor in the failure of firms in the very early 1990s, the 1990-1991 recession was the primary cause.
A)True
B)False
Q3) The Crystal Oil Company was the first major prepackaged bankruptcy.
A)True
B)False
Q4) Which of the following is the largest bankruptcy in history?
A)Continental Airlines
B)Worldcom
C)Lehman Brothers
D)None of the above
Q5) George and Hwang found that firms with high distress costs had:
A)Lower leverage
B)Lower probabilities of default
C)None of the above
D)Both a and b
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Chapter 13: Corporate Governance
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Q1) Research shows that companies tend to have positive shareholder wealth effects when outside directors are added to a company's board.
A)True
B)False
Q2) Core, Holthausen, and Larker's research found that CEO compensation was greater for the directors who were gray, over age 69, or who served on three or more boards.
A)True
B)False
Q3) Research, such as the study by Fich and Shivdasani, has shown that companies that have over half of the outside directors sitting on three or more boards have which of the following?
A)Better financial performance but not better governance
B)Better governance but not better financial performance
C)Better governance and better financial performance
D)Neither better governance nor better financial performance
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Chapter 14: Joint Ventures and Strategic Alliances
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Q1) The following are motives for joint ventures except for:
A)Enhance research and development capabilities
B)Gain access to key supplies
C)Enhance distribution systems
D)Enhance market share
Q2) Chan, Kensinger, Keown, and Martin found positive abnormal returns from strategic alliances.
A)True
B)False
Q3) The following can be a reason why joint ventures may not succeed:
A)Disagreement among participants
B)Distrust among the participants
C)Payment of too high a takeover premium
D)All of the above
E)Both a and b
Q4) Chan, Kensinger, Keown, and Martin found significant transfers of wealth from alliance partners.
A)True
B)False
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Chapter 15: Valuation
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Q1) Moeller, Schlingemann, and Stulz's research shows that during the period 1998-2001, acquiring firm shareholders gained a total of $240 billion!
A)True
B)False
Q2) Continuing value and exit value mean the same thing.
A)True
B)False
Q3) For the bidder to enjoy an increase in EPS following a series of acquisitions, and in effect, play the P/E game, the following must be true:
A)Post-deal P/E ratio must not decline
B)Acquirer must pay continually lower premiums with each deal
C)The bidder must make fewer deals over time
D)None of the above
Q4) When multiples are derived from an analysis of historical earnings, they are referred to as trailing multiples.
A)True
B)False
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Chapter 16: Tax Issues in Mergers & Acquisitions
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Q1) Research by Auerbach and Poterba and by Altshuler and Auerbach on tax loss carry forwards indicate that the following tax-related factor may offset the otherwise full value of the target's losses:
A)Failure to achieve synergistic gains
B)Improved research and development
C)Expiration
D)Post-acquisition litigation
E)All of the above
Q2) In a Type B reorganization in the United States, at least what percent of the payment to the target must be stock in the acquiring company:
A)20%
B)50%
C)80%
D)100%
E)No specific percentage
Q3) In the United States, amortization of goodwill for acquisitions prior to August 10, 1993, was not deductible for tax purposes.
A)True
B)False
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