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Exam (elaborations)

WPC 480 Final – Gomez Questions With Complete Solutions

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WPC 480 Final – Gomez Questions With Complete Solutions takeover a special type of acquisition where the target firm does not solicit the acquiring firm's bid; thus, takeovers are unfriendly acquisitions (Hostile) •AOL and Time Warner •Bayer and Monsanto (2018) Reversing Acquisitions...

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  • October 23, 2024
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  • WPC 480
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WPC 480 Final – Gomez Questions With
Complete Solutions

takeover a special type of acquisition where the target firm does not solicit the acquiring

firm's bid; thus, takeovers are unfriendly acquisitions




(Hostile)

•AOL and Time Warner

•Bayer and Monsanto (2018)




Reversing Acquisitions: Restructuring a strategy through which a firm changes its set of

businesses or its financial structure

-Failure of an acquisition strategy often precedes a restructuring strategy

-Restructuring may also occur because of changes in the external environment




•Downscoping, Downsizing, Leveraged buy-out




International Strategy a strategy through which the firm sells its goods or services outside

its domestic market

, WPC 480 Final – Gomez Questions With
Complete Solutions
multidomestic strategy an international strategy in which strategic and operating decisions

are decentralized to the strategic business units in individual countries or regions for allowing

each unit the opportunity to tailor products to the local market




global strategy an international strategy in which a firm's home office determines the

strategies that business units are to use in each country or region




transnational strategy an international strategy through which the firm seeks to achieve

both global efficiency and local responsiveness




greenfield venture an entry mode through which a firm invests directly in another country

or market by establishing a new wholly owned subsidiary




international diversification strategy a strategy through which a firm expands the sales of

its goods or services across the borders of global regions and countries into a potentially large

number of geographic locations or markets

, WPC 480 Final – Gomez Questions With
Complete Solutions
Corporate Governance the set of mechanisms used to manage the relationships among

stakeholders and to determine and control the strategic direction and performance of

organizations




-Concerned with identifying ways to ensure that strategic decisions are made more effectively




-"how firms should be run"




agency relationship exists when one party delegates decision-making responsibility to a

second party for compensation




Managerial Opportunism the seeking of self-interest with guile (i.e., cunning or deceit)




Prevents the maximization of shareholder wealth (the primary goal of owner/principals) and

leads to:




Agency Costs

- Financial losses from self-interested decision making plus the costs of incentivizing and

monitoring managers

, WPC 480 Final – Gomez Questions With
Complete Solutions

How to limit agency costs?

-Monitor managers (making sure they do what owners want)




Owners and board of directors

-Incentivize them

-Market for corporate control




Agency costs the sum of incentive costs, monitoring costs, enforcement costs, and

individual financial losses incurred by principals because governance mechanisms cannot

guarantee total compliance by the agent




Ownership Concentration defined by the number of large-block shareholders and the total

percentage of the firm's shares they own




Large-block shareholders typically own at least 5 percent of a company's issued shares

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