a. Are the following hypothetical mergers horizontal, vertical, or conglomerate?

i. Apple acquires Blackberry

ii. Dell Computer acquires Best Buy

iii. Best Buy acquires Kraft Foods.

iv. Pizza Hut acquires Eshs Flour Mills.

b. Which of the following motives for mergers make economic sense?

i. Merging to achieve economics of scale

ii. Merging to reduce risk by diversification

iii. Merging to redeploy cash generated by a firm with ample profits but limited growth opportunities

iv. Merging to combine complementary resources

v. Merging just to increase earnings per share

c. True or False (No explanation required)

i. Sellers almost always gain in mergers

ii. Buyers usually gain more than sellers

iii. Firms that do unusually well tend to be acquisition targets

iv. Merger activity in the U.S. tends to vary dramatically year to year