Findings from several studies on corporate mergers and acquisitions during the 1970s and 1980s raise questions about why firms initiate and consummate such transactions. One study showed, for example, that acquiring firms were on average unable to maintain acquired firms’ pre-merger levels of profitability. A second study concluded that post-acquisition gains to most acquiring firms were not adequate to cover the premiums paid to obtain acquired firms. A third demonstrated that, following the announcement of a prospective merger, the stock of the prospective acquiring firm tends to increase in value much less than does that of the firm for which it bids. Yet mergers and acquisitions remain common, and bidders continue to assert that their objectives are economic ones. Acquisitions may well have the desirable effect of channeling a nation’s resources efficiently from less to more efficient sectors of its economy, but the individual acquisitions executives arranging these deals must see them as advancing either their own or their companies’ private economic interests. It seems that factors having little to do with corporate economic interests explain acquisitions. These factors may include the incentive compensation of executives, lack of monitoring by boards of directors, and managerial error in estimating the value of firms targeted for acquisition. Alternatively, the acquisition acts of bidders may derive from modeling: a manager does what other managers do. Questions 64–70 refer to the passage above. 1 64. The primary purpose of the passage is to (A) review research demonstrating the benefits of corporate mergers and acquisitions and examine some of the drawbacks that acquisition behavior entails (B) contrast the effects of corporate mergers and acquisitions on acquiring firms and on firms that are acquired (C) report findings that raise questions about a reason for corporate mergers and acquisitions and suggest possible alternative reasons (D) explain changes in attitude on the part of acquiring firms toward corporate mergers and acquisitions (E) account for a recent decline in the rate of corporate mergers and acquisitions 2 65. The findings cited in the passage suggest which of the following about the outcomes of corporate mergers and acquisitions with respect to acquiring firms? (A) They include a decrease in value of many acquiring firms’ stocks. (B) They tend to be more beneficial for small firms than for large firms. (C) They do not fulfill the professed goals of most acquiring firms. (D) They tend to be beneficial to such firms in the long term even though apparently detrimental in the short term. (E) They discourage many such firms from attempting to make subsequent bids and acquisitions. 3 66. It can be inferred from the passage that the author would be most likely to agree with which of the following statements about corporate acquisitions? (A) Their known benefits to national economies explain their appeal to individual firms during the 1970s and 1980s. (B) Despite their adverse impact on some firms,they are the best way to channel resources from less to more productive sectors of a nation’s economy. (C) They are as likely to occur because of poor monitoring by boards of directors as to be caused by incentive compensation for managers. (D) They will be less prevalent in the future, since their actual effects will gain wider recognition. (E) Factors other than economic benefit to the acquiring fi rm help to explain the frequency with which they occur. 4 67. The author of the passage mentions the effect of acquisitions on national economies most probably in order to (A) provide an explanation for the mergers and acquisitions of the 1970s and 1980s overlooked by the findings discussed in the passage (B) suggest that national economic interests played an important role in the mergers and acquisitions of the 1970s and 1980s (C) support a noneconomic explanation for the mergers and acquisitions of the 1970s and 1980s that was cited earlier in the passage (D) cite and point out the inadequacy of one possible explanation for the prevalence of mergers and acquisitions during the 1970s and 1980s (E) explain how modeling affected the decisions made by managers involved in mergers and acquisitions during the 1970s and 1980s 5 68. According to the passage, during the 1970s and 1980s bidding firms differed from the firms for which they bid in that bidding firms (A) tended to be more profi table before a merger than after a merger (B) were more often concerned about the impact of acquisitions on national economies (C) were run by managers whose actions were modeled on those of other managers (D) anticipated greater economic advantages from prospective mergers (E) experienced less of an increase in stock value when a prospective merger was announced 6 69. According to the passage, which of the following was true of corporate acquisitions that occurred during the 1970s and 1980s? (A) Few of the acquisitions that f rms made were subsequently divested. (B) Most such acquisitions produced only small increases in acquired firms’ levels of profitability. (C) Most such acquisitions were based on an overestimation of the value of target firms. (D) The gains realized by most acquiring firms did not equal the amounts expended in acquiring target firms. (E) About half of such acquisitions led to long-term increases in the value of acquiring firms’ stocks. 7 70. The author of the passage implies that which of the following is a possible partial explanation for acquisition behavior during the 1970s and 1980s? (A) Managers wished to imitate other managers primarily because they saw how financially beneficial other firms’ acquisitions were. (B) Managers miscalculated the value of firms that were to be acquired. (C) Lack of consensus within boards of directors resulted in their imposing conflicting goals on managers. (D) Total compensation packages for managers increased during that period. (E) The value of bidding firms’ stock increased significantly when prospective mergers were announced.

Last visit was: 01 May 2026, 16:15

It is currently 01 May 2026, 16:15

Toolkit

Reading Comprehension (RC)

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Go to My Error Log Learn more

Request Expert Reply

Confirm Cancel

Back to Forum

Create Topic

Findings from several studies on corporate mergers and acquisitions

1 2 3

edlc313

Joined: 15 Jan 2018

Last visit: 27 Jul 2025

Posts: 49

Own Kudos:

139

Given Kudos: 30

Posts: 49

Kudos: 139

30 Oct 2019, 19:55

Kudos

Bookmarks

anurag356

Hello everyone ....

I have a doubt in question 70, its pretty simple but my concern is the question's phrasing . The questions says" The author of the passage implies..... ?"
Now as far as I know if we have a imply question the answer to that question will not be explicitly mentioned in the passage and that is not case here. Answer choice B is clearly stated.Its like restating the given.

So is my thumb rule for imply questions incorrect ?? or this a strange case.

Please help out !!

Thanks and kudos for solutions !

I ran into the same exact problem. B is clearly stated whereas D is the implied meaning. My initial doubt in answer choice D was that it mentions an increase in compensation for executives, whereas the passage doesn't mention any increase, per se. That's where I revisited the question and saw that it must've been an implied answer, and that led me back to D.

Not sure why the heck B works here better than D does.

GMATNinja

GMAT Club Verbal Expert

Joined: 13 Aug 2009

Last visit: 01 May 2026

Posts: 7,391

Own Kudos:

70,843

[2]

Given Kudos: 2,133

Status: GMAT/GRE/LSAT tutors

Location: United States (CO)

GMAT 1: 780 Q51 V46 Verified score

GMAT 2: 800 Q51 V51 Verified score

GRE 1: Q170 V170 Verified score

GRE 2: Q170 V170 Verified score

Products:

Expert

Expert reply

GMAT 2: 800 Q51 V51 Verified score

GRE 1: Q170 V170 Verified score

GRE 2: Q170 V170 Verified score

Posts: 7,391

Kudos: 70,843

[2]

11 Nov 2019, 07:13

Kudos

Bookmarks

edlc313

anurag356

The problem with (D) is that there is no evidence in the passage that there was such an increase. Perhaps if we were told that mergers and acquisitions INCREASED during that period we could speculate that the increase may have been partially caused by an increase in total compensation packages for managers.

But all we are told is that we are looking at studies on corporate mergers and acquisitions during the 1970s and 1980s. We are told that "mergers and acquisitions remain common," but there is nothing to suggest that mergers and acquisitions increased during that time.

As for your concern with choice (B), I think this post will help.

brains

Joined: 30 May 2017

Last visit: 04 Apr 2026

Posts: 86

Own Kudos:

135

Given Kudos: 169

Location: India

Concentration: Finance, Strategy

Schools: Darden '23 Goizueta '24 Fuqua '24 ISB '23 Kelley '24 Mendoza Ross '24 Tepper '24 Tuck '24 WBS Rotman '24

GPA: 3.73

WE:Engineering (Consulting)

Products:

Schools: Darden '23 Goizueta '24 Fuqua '24 ISB '23 Kelley '24 Mendoza Ross '24 Tepper '24 Tuck '24 WBS Rotman '24

Posts: 86

Kudos: 135

20 Jun 2020, 07:49

Kudos

Bookmarks

Got 2 incorrect(Q Nos 3 & 4) out of 7 . Time - 10mins 13 secs
Though i realised that for Question no 3, i marked wrong choice after i chose answer. Was able to drop down to C and E choice.
However for question no 4. , I am not clear. The question reads as

The author of the passage mentions the effect of acquisitions on national economies most probably in order to

(A) provide an explanation for the mergers and acquisitions of the 1970s and 1980s overlooked by the findings discussed in the passage
(B) suggest that national economic interests played an important role in the mergers and acquisitions of the 1970s and 1980s
(C) support a noneconomic explanation for the mergers and acquisitions of the 1970s and 1980s that was cited earlier in the passage
(D) cite and point out the inadequacy of one possible explanation for the prevalence of mergers and acquisitions during the 1970s and 1980s
(E) explain how modeling affected the decisions made by managers involved in mergers and acquisitions during the 1970s and 1980s

Now A is out because of the "Overlooked by the findings"
B is out because of too narrow interest. Just before the statement, it says M&A are common and firms bid.
C looks a good option because the author specifically says about corporate economic benefits and thing having little do with corporate economic benefits explains acquisitions. So i thought , the author brought that out primarily in order to discuss non economic and little benefits as mentioned in the passage in the last second sentence
D . Could not related.
E. Irrelevant

I marked C however OA is D. Can experts shed some light into this?

GMATNinja and VeritasKarishma

Thanks

KarishmaB

Tutor

Joined: 16 Oct 2010

Last visit: 29 Apr 2026

Posts: 16,448

Own Kudos:

79,469

[2]

Given Kudos: 485

Location: Pune, India

Products:

Expert

Expert reply

Posts: 16,448

Kudos: 79,469

[2]

22 Jun 2020, 04:37

Kudos

Bookmarks

brains

(C) is incorrect because it is not a non-economic factor. We are talking about 'effect on national economies'; it is an economic effect.

Look at the structure of the passage:

First paragraph talks about how acquisitions don't benefit the acquiring firm a whole lot.

Second paragraph - Acquisitions may well have the desirable effect of channeling a nation’s resources efficiently from less to more efficient sectors of its economy, but the individual acquisitions executives arranging these deals must see them as advancing either their own or their companies’ private economic interests...

The second paragraph starts with the benefit to the national economy but says that these deals MUST be advancing executives or companies' economic interests. So though national economic benefit does arise and could be a reason but it is certainly not an adequate reason. Executives or companies' economic interests must be served through these deals. Then he goes on to explain how the executives interests could be the reason for acquisitions.

Hence (D) is correct.

jack0997

Joined: 11 Nov 2013

Last visit: 29 Oct 2022

Posts: 32

Own Kudos:

Given Kudos: 25

Posts: 32

Kudos: 84

Updated on: 14 Jan 2021, 22:53

Originally posted by jack0997 on 30 Dec 2020, 05:10.
Last edited by jack0997 on 14 Jan 2021, 22:53, edited 1 time in total.

Kudos

Bookmarks

GMATNinja VeritasKarishma

Need help in Q70. Why are Options A and D are wrong?

giovannisumano

Joined: 27 Aug 2020

Last visit: 21 Aug 2021

Posts: 31

Own Kudos:

Given Kudos: 146

Posts: 31

Kudos: 9

14 Jan 2021, 17:15

Kudos

Bookmarks

I didn't pick the right answer in the first question (c) because nowhere in the passage is stated or suggested that the author is questioning a particular reason as to why the mergers and acquisitions are made:

"C) Report findings that raise questions about a reason for corporate mergers and acquisitions and suggest possible alternative reasons"

souldn't the answer read "Report findings that raise questions about some reasons for corporate mergers and acquisitions and suggest possible alternative reasons"?

Even the official explanation as to why C is correct reads "C Correct. The passage surveys reports that question the reasons given by firms when they acquire other firms and suggests other reasons for these acquisitions"

So, can someone help me understand why answer C isn't wrong?

KarishmaB

Tutor

Joined: 16 Oct 2010

Last visit: 29 Apr 2026

Posts: 16,448

Own Kudos:

79,469

[3]

Given Kudos: 485

Location: Pune, India

Products:

Expert

Expert reply

Posts: 16,448

Kudos: 79,469

[3]

18 Jan 2021, 05:16

Kudos

Bookmarks

jack0997

GMATNinja VeritasKarishma

Need help in Q70. Why are Options A and D are wrong?

jack0997

The passage gives the reasons why acquisitions happen in the second paragraph.

These factors may include:
the incentive compensation of executives,
lack of monitoring by boards of directors,
managerial error in estimating the value of firms targeted for acquisition.
Modeling: a manager does what other managers do.

70. The author of the passage implies that which of the following is a possible partial explanation for acquisition behavior during the 1970s and 1980s?

(A) Managers wished to imitate other managers primarily because they saw how financially beneficial other firms’ acquisitions were.

The passage tells us that one reason is imitation. Managers do it because other managers do it. The reason is not because they see how financially beneficial other firms’ acquisitions were.

(B) Managers miscalculated the value of firms that were to be acquired.

Correct. "managerial error in estimating the value of firms targeted for acquisition" is a reason given.

(C) Lack of consensus within boards of directors resulted in their imposing conflicting goals on managers.

Conflicting goals not given.

(D) Total compensation packages for managers increased during that period.

We know the executives get incentive compensation. Does it increase the total package, we don't know.

(E) The value of bidding firms’ stock increased significantly when prospective mergers were announced.

This is not given as a reason.

Answer (B)

GMATNinja

GMAT Club Verbal Expert

Joined: 13 Aug 2009

Last visit: 01 May 2026

Posts: 7,391

Own Kudos:

70,843

[2]

Given Kudos: 2,133

Status: GMAT/GRE/LSAT tutors

Location: United States (CO)

GMAT 1: 780 Q51 V46 Verified score

GMAT 2: 800 Q51 V51 Verified score

GRE 1: Q170 V170 Verified score

GRE 2: Q170 V170 Verified score

Products:

Expert

Expert reply

GMAT 2: 800 Q51 V51 Verified score

GRE 1: Q170 V170 Verified score

GRE 2: Q170 V170 Verified score

Posts: 7,391

Kudos: 70,843

[2]

18 Jan 2021, 11:04

Kudos

Bookmarks

Question 1

giovannisumano

First, let’s consider the author’s purpose in each paragraph:

Whether (C) is incorrect depends on what we identify as the reason that the passage questions. It’s true that the passage identifies several possible reasons for M&A. But the primary purpose of the passage is to first question one of those reasons and then present alternative reasons.

The reason that the argument questions is that bidders are motivated by corporate economic interests. As we said above, the first paragraph is dedicated to presenting studies that question the economic benefits of M&A to acquiring companies. Then, in the second paragraph, the author presents alternative reasons for M&A, including executive compensation, lack of board monitoring, and managerial error. The passage never questions these reasons. He/she merely questions whether corporate economic interests really drive M&A.

For those reasons, (C) is correct.

I hope that helps!

giovannisumano

Joined: 27 Aug 2020

Last visit: 21 Aug 2021

Posts: 31

Own Kudos:

Given Kudos: 146

Posts: 31

Kudos: 9

18 Jan 2021, 12:00

Kudos

Bookmarks

GMATNinja

Question 1

giovannisumano

First, let’s consider the author’s purpose in each paragraph:

Thank you GMATninja for your reply, I understand that the author lists a number of studies to call into question if the mergers and acquisitions made by companies truly have an economic advantage. Maybe I'm being too rigid with the language but my doubt arose from the fact that the author is using plural in the last sentence of the last paragraph: "Yet mergers and acquisitions remain common, and bidders continue to assert that their objectives are economic ones.". "their objectives are economic ones" sound to me like there are more than one reason, so, I guess we have to consider that these "objectives" are grouped into a single reason, as if to say: "The reason for the mergers and acquisitions is to safeguard the economic interests of the companies"?

GMATNinja

GMAT Club Verbal Expert

Joined: 13 Aug 2009

Last visit: 01 May 2026

Posts: 7,391

Own Kudos:

70,843

[2]

Given Kudos: 2,133

Status: GMAT/GRE/LSAT tutors

Location: United States (CO)

GMAT 1: 780 Q51 V46 Verified score

GMAT 2: 800 Q51 V51 Verified score

GRE 1: Q170 V170 Verified score

GRE 2: Q170 V170 Verified score

Products:

Expert

Expert reply

GMAT 2: 800 Q51 V51 Verified score

GRE 1: Q170 V170 Verified score

GRE 2: Q170 V170 Verified score

Posts: 7,391

Kudos: 70,843

[2]

23 Jan 2021, 14:21

Kudos

Bookmarks

giovannisumano

GMATNinja

Question 1

giovannisumano

First, let’s consider the author’s purpose in each paragraph:

Within the passage as a whole, the last sentence of the first paragraph serves as a transition to the second paragraph. In the first paragraph, the author has laid out why corporate economic interests may not be driving M&A. But, in the last sentence of the first paragraph, we learn that bidders still assert their motives are economic. This leads to the author’s point in the second paragraph that the economic motives may be those of the executives and NOT of the corporations.

I don’t think that you’re being too rigid with the language, but the fact that bidders assert their “objectives” are economic does not mean that the author is questioning all of those objectives. It simply means that the bidders claim to have economic objectives, and the author questions whether those economic objectives are corporate and suggests that they may be personal instead.

I hope that helps!

Poojita

Joined: 30 Dec 2019

Last visit: 02 Oct 2022

Posts: 68

Own Kudos:

Given Kudos: 654

Location: India

Schools: LBS MFA "23

Products:

Schools: LBS MFA "23

Posts: 68

Kudos: 85

21 Feb 2021, 14:48

Kudos

Bookmarks

Canyou please explain why A is not the answer, although I perfectly understand how B is qualifying to be the answer but why not A

svasan05

CrackVerbal Representative

Joined: 02 Mar 2019

Last visit: 24 Feb 2023

Posts: 269

Own Kudos:

313

Expert

Expert reply

Posts: 269

Kudos: 313

27 Feb 2021, 09:35

Kudos

Bookmarks

Poojita

Canyou please explain why A is not the answer, although I perfectly understand how B is qualifying to be the answer but why not A

Hi Poojita

Option (A) states: Managers wished to imitate other managers primarily because they saw how financially beneficial other firms’ acquisitions were.

However, the passage tells us only half of this statement ie; "a manager does what other managers do".

We do not know if a manager imitates because she sees the profitability of acquisitions done by other managers. The imitation could be due to any number of reasons. It could also be imitation just for the sake of imitation ie; a manager does acquisitions just because other managers do them and for no other reason (going by the passage, this last case is probably what is implied by the passage).

Hence, option (A) is not entirely true, and cannot be the correct answer. Hope this helps.

mSKR

Joined: 14 Aug 2019

Last visit: 10 Mar 2024

Posts: 1,210

Own Kudos:

961

Given Kudos: 381

Location: Hong Kong

Concentration: Strategy, Marketing

Schools: IE (A) IIML-IPMX '22 (A) HKUST '22

GMAT 1: 650 Q49 V29 Verified score

GPA: 3.81

Schools: IE (A) IIML-IPMX '22 (A) HKUST '22

GMAT 1: 650 Q49 V29 Verified score

Posts: 1,210

Kudos: 961

27 Apr 2021, 08:16

Kudos

Bookmarks

Quote:

67. The author of the passage mentions the effect of acquisitions on national economies most probably in order to

(A) provide an explanation for the mergers and acquisitions of the 1970s and 1980s overlooked by the findings discussed in the passage
(B) suggest that national economic interests played an important role in the mergers and acquisitions of the 1970s and 1980s
(C) support a noneconomic explanation for the mergers and acquisitions of the 1970s and 1980s that was cited earlier in the passage
(D) cite and point out the inadequacy of one possible explanation for the prevalence of mergers and acquisitions during the 1970s and 1980s
(E) explain how modeling affected the decisions made by managers involved in mergers and acquisitions during the 1970s and 1980s

Hello AndrewN sir

This is a similar question toyesterday's post

I am little confused :
Whenever such question comes, I should focus on that part of context which is referred, meaning of the whole sentence or connect with overall intention of the passage.

Example : for this particular question:
Acquisitions may well have the desirable effect of channeling a nation’s resources efficiently from less to more efficient sectors of its economy, but the individual acquisitions executives arranging these deals must see them as advancing either their own or their companies’ private economic interests.

blue part is the specific context --> it introduces that national resources could be one reason for acquisition.
but-changes tone
pink part--> no no , channeling national resources was also not the reason. The overall intention was towards non-economic reasons.

As per my understanding, the author's intention comes with the overall meaning ( why part) . What key message he is trying to point out?
he is trying to rule out the possibility of other possible scenario--so D option looks good.

When I thought a deep more, I realized , actually he is writing to support the idea that non-economic reasons were main reasons for the acquisition but these acquisitions have nothing to do economic reasons. Even no reason related with national economy.
So I chose C ( it seems to support non-economic reason with his tone)

My query:
the sentence part that is pointed in the question ( actually what option A says) , But , following sentence <change in the tone > ( option D).
related this whole sentence with overall idea ( Option C)

Learning: Shall I keep my reasoning till the tone of that whole sentence . hence can get D.
A is wrong because it starts introduction but has not yet completed the overall tone( author's meaning) with this part of stance.
C is wrong because it is beyond what is mentioned in sentence.

is my understanding right?
Please confirm

2.) In yesterday question, language was soft for the correct answer. But here language is same ( means words such as may ,possible etc. are not used with verb ) . IN short, i can't take any hint from here, so I need to go back to previous reasoning.
Am i right?

Thanks AndrewN sir

AndrewN

Volunteer Expert

Joined: 16 May 2019

Last visit: 29 Mar 2025

Posts: 3,490

Own Kudos:

7,672

[2]

Given Kudos: 500

Expert

Expert reply

Posts: 3,490

Kudos: 7,672

[2]

27 Apr 2021, 14:38

Kudos

Bookmarks

mSKR

Quote:

Hello, mSKR. I think you have misunderstood the crucial line from the passage that you quoted above, and it is likely your misinterpretation that led you to make the wrong conclusion.

Quote:

Acquisitions may well have the desirable effect of channeling a nation’s resources efficiently from less to more efficient sectors of its economy, but the individual acquisitions executives arranging these deals must see them as advancing either their own or their companies’ private economic interests.

Here, the author is saying that although business acquisitions can help the economy of a nation, the people involved in making the acquisitions see the process through for financial reasons—either their own or their companies' private economic interests. In other words, these people are not thinking about the national economy, but about their own pocketbooks or the bottom line of their respective companies. In light of this new interpretation, you should be able to spot the holes in the incorrect answers.

Quote:

The three studies mentioned in the first paragraph are used to follow up on the topic sentence of the passage. They raise questions about why firms initiate and consummate [corporate mergers and acquisitions], since all three studies found that the acquisitions produced some negative outcome for the acquiring firms. The author continues exploring the same basic question in paragraph two—i.e. why do firms acquire others? The excerpt from the passage above indicates the exact opposite of what you had thought. In other words, the author invokes national economies to further the point that the people involved in corporate mergers and acquisitions are thinking of themselves, that their objectives are economic ones, to quote the last line of the first paragraph. In (D), one possible explanation refers not to the economic/financial explanation, but to an alternative explanation in which the mergers and acquisitions are done for the good of the national economy.

Since corporate mergers and acquisitions are painted in such a negative light in the passage, the author then posits that it seems that factors having little to do with corporate economic interests explain acquisitions. The acquisition managers act in ways that do not necessarily help the company, but they bid on other businesses under the guise that an acquisition or merger would, in fact, help the company.

I hope that all makes sense now. When you read, do not be afraid to slow down and make sure the words and sentences connect. Otherwise, the answers to questions will seem all over the place.

- Andrew

kittle

Joined: 11 May 2021

Last visit: 07 Feb 2026

Posts: 298

Own Kudos:

161

Given Kudos: 619

Posts: 298

Kudos: 161

14 Jun 2021, 13:35

Kudos

Bookmarks

Why is partial explanation have been mentioned in the question 71?

AnirudhaS

LBS Moderator

Joined: 30 Oct 2019

Last visit: 25 Jun 2024

Posts: 777

Own Kudos:

887

[1]

Given Kudos: 1,575

Posts: 777

Kudos: 887

[1]

30 Jun 2021, 13:00

Kudos

Bookmarks

kittle

Why is partial explanation have been mentioned in the question 71?

The passage says -
"It seems that factors having little to do with corporate economic interests explain acquisitions. These factors may include the incentive compensation of executives, lack of monitoring by boards of directors, and managerial error in estimating the value of firms targeted for acquisition."
The author says there are many factors. Some of the factors may be
(a) the incentive compensation of executives
(b) lack of monitoring by boards of directors
(c) managerial error in estimating the value of firms targeted for acquisition

So (c) is only one possible factors, so the author says this may explain in part.

Hope this helps.

Jainam24

Joined: 30 Dec 2020

Last visit: 18 Dec 2022

Posts: 96

Own Kudos:

Given Kudos: 332

Status:Enjoy the journey, love the process

Location: India

Posts: 96

Kudos: 59

15 Jul 2021, 07:59

Kudos

Bookmarks

VeritasKarishma

brains

VeritasKarishma
I was confused between A and D. Rejected D on the grounds "cite" was used. Citations are something related to research and doesn't one need to show the source? That was my thinking. Option A seemed fine in the sense that the 3 research findings seemed not to capture this possible reason. I wish to understand the flaw in my thinking. What makes A incorrect?
And could you unpack what option D means particularly what inadequacy means in the context of the option? I simplified it to the literal meaning: inadequacy=unavailablity
Look forward to your answer. Many thanks

KarishmaB

Tutor

Joined: 16 Oct 2010

Last visit: 29 Apr 2026

Posts: 16,448

Own Kudos:

79,469

[1]

Given Kudos: 485

Location: Pune, India

Products:

Expert

Expert reply

Posts: 16,448

Kudos: 79,469

[1]

15 Jul 2021, 22:27

Kudos

Bookmarks

Jainam24

VeritasKarishma

brains

(A) provide an explanation for the mergers and acquisitions of the 1970s and 1980s overlooked by the findings discussed in the passage

The findings do not discuss this reason - correct. But does the author provide it as an explanation for M&A of the 70s and 80s? No.

Acquisitions may well have the desirable effect of channeling a nation’s resources efficiently from less to more efficient sectors of its economy, but the individual acquisitions executives arranging these deals must see them as advancing either their own or their companies’ private economic interests. It seems that factors having little to do with corporate economic interests explain acquisitions. These factors may include the incentive compensation of executives, lack of monitoring by boards of directors, ...

The reasons given by the author are incentive compensation, lack of monitoring etc.
He says that sure M&A have this desirable effect on nation's economy but the executives must see them as advancing either their own or their companies’ private economic interests to take this step. Hence, he says that executive don't take this step to improve the nation's economy. They must have their own economic agenda.
Hence (A) is not correct.

(D) cite and point out the inadequacy of one possible explanation for the prevalence of mergers and acquisitions during the 1970s and 1980s

"cite" means "mention". For example, we say that you must cite your sources.
The author does cite this "possible explanation" but goes on to imply that this is not an adequate explanation by saying "but the executives arranging these deals must see them as advancing either their own or their companies’ private economic interests".
Hence (D) is incorrect.

RuchitaB

Joined: 03 Oct 2022

Last visit: 08 Apr 2024

Posts: 24

Own Kudos:

Given Kudos: 195

Posts: 24

Kudos: 5

21 Jun 2023, 08:31

Kudos

Bookmarks

Acquisitions may well have the desirable effect of channeling a nation???s resources efficiently from less to more efficient sectors of its economy, but the individual acquisitions executives arranging these deals must see them as advancing either their own or their companies??? private economic interests.

I don't understand the meaning / context of this statement .. Can you please help me with that?

Also, the solution to the question no. 67..

DmitryFarberMPrep

Manhattan Prep Instructor

Joined: 22 Mar 2011

Last visit: 03 Mar 2026

Posts: 3,005

Own Kudos:

8,627

[2]

Given Kudos: 57

Expert

Expert reply

GMAT Focus 1: 745 Q86 V90 DI85 Verified score

Posts: 3,005

Kudos: 8,627

[2]

23 Jun 2023, 00:55

Kudos

Bookmarks

RuchitaB

Yeah, no one seems to enjoy that sentence. Basically, all it's saying is this: When one company acquires another, that may be good for the economy of a nation. It may be efficient for the market. But that doesn't explain why a company does it! Surely, if Facebook or Google acquires some small company, they aren't doing so out of patriotism. They aren't trying to improve the economy. Whoever is in charge of the acquisition must think that the deal will be good for their company, or themself, or both. So pointing out the nice effect of mergers does nothing to explain why people do them, even when so much evidence makes mergers look like a bad idea.

This sentence is bridging the two paragraphs. Paragraph 1 shows lots of evidence that m&a is not helpful for companies, so we're left to wonder why people still do it so often. Paragraph 2 suggests this noble economic reason, but then says that this can't be what's really motivating people. Then it gives us some more realistic ideas (at least in the author's mind) about why m&a keeps happening.