Short Type Questions - Enterprise Growth Strategies, Entrepreneurship, Class 12 | Additional Study Material for Commerce PDF Download

Q1. Name the types of acquisitions. (TBQ) (5 marks)
Ans.
(i) Friendly acquisition,
(ii) Reverse acquisition,
(iii) Back flip acquisition,
(iv) Hostile acquisition.

Q2. “Unique Motors Ltd.” was a car dealer. It took over a car manufacturing plant “Speed Cart & Co.” and started a new business in the name of “Unique Cart Ltd.” To synergise and capture a major share of the market like other competitors, they decided to sell their cars through company appointed dealers (retailers) in various parts of the country. This would relieve the company from the burden of selling the cars while at the same time giving them control over the distribution process.
(a) Name and explain the “Enterprise growth strategy”.
(b) Identify the channel of distribution used by “Unique Cart Ltd.”. (SQP) (6 marks)
Ans.
(a) Merger : It is a combination of two companies into one larger company. The acquiring company takes over the assets of the merged company. All the combining companies are dissolved and only the new entity continues to operate.
(b) Indirect : One level It involves one middleman called “retailer”.

Q3. Name the types of merger. (6 marks)
Ans.
(i) Conglomerate merger.
(ii) Horizontal merger.
(iii) Vertical merger.
(iv) Market extension merger.
(v) Product extension merger.

Q4. What are the reasons for merger and acquisition ? (6 marks)
Ans.
(i) Synergy,
(ii) Acquiring new technology,
(iii) Improved profitability,
(iv) Entry into new markets,
(v) Tax benefits,
(vi) Access to funds.

Q5. Differentiate between horizontal merger and vertical merger. (6 marks)
Ans.
(i) Horizontal merger takes place between competitors offering the same goods or services while vertical merger is between two companies producing different goods or services for one specific finished good.
(ii) Goal of horizontal merger is to create a new, larger organization with more market share while that of vertical merger is to increase synergies created by merging firms.

Q6. How inadequate due diligence result in failure of merger and acquisition ?
Ans. Due diligence is a crucial component of the merger and acquisition process as it helps in detecting financial and business risks that the acquirer inherits from the target company. Inaccurate estimation of the related risk can result in failure of the merger.

Q7. Differentiate between market extension merger and product extension merger. (6 marks)
Ans.
(i) Market extension merger takes place between two companies that deal in the same products but in separate markets. Product extension merger takes place between two business organization that are related to each other and operate in same market.
(ii) Purpose of market extension merger is to get access to bigger market which ensures a bigger client base while product extension merger allows merging companies to group together their products and get access to a bigger set of consumers.

Q8. Explain conglomerate merger. (6 marks)
Ans. Conglomerate merger is merger between two firms that are involved in totally unrelated business activities.

These are of two types : Pure merger and mix merger.

Q9. Distinguish between consolidation and merger. (6 marks)
Ans.

Q10. Explain the two forms of acquisition. (6 marks)
Ans.
(i) Amalgamation : Amalgamation is the union of two or more companies, made with an intention to form a new entity or company.
(ii) Absorption : In this an existing company takes over one or more companies. The taken over companies close down their business and this business is continued in the name of the existing companies.