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Findings from several studies on corporate mergers and acquisitions du

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Re: Findings from several studies on corporate mergers and acquisitions du  [#permalink]

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New post 29 Apr 2018, 02:03
I can eliminate other answers to choose C but I can not understand why C is true. Are "professed goals" = level of profitability? Is it common knowledge?

Quote:
"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."
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Re: Findings from several studies on corporate mergers and acquisitions du  [#permalink]

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New post 03 May 2018, 17:40
BinhFantasia wrote:
I can eliminate other answers to choose C but I can not understand why C is true. Are "professed goals" = level of profitability? Is it common knowledge?

Quote:
"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."

"Yet mergers and acquisitions remain common, and bidders continue to assert that their objectives are economic ones." - The bidders (i.e. the acquiring firms) assert (or profess) that the deals will benefit their firms economically.

But the "second study concluded that post-acquisition gains to most acquiring firms were not adequate to cover the premiums paid to obtain acquired firms." If the premiums paid exceed the post-acquisition gains, then the firm would have lost money on the deal. Obviously this would not benefit the firm economically.

The bidders profess that they are doing the deals for economic reasons, but the study suggests that most bidding firms lose money on the deals. Thus, the outcomes of the deals do not fulfill the professed goals (economic gains) of the acquiring firms.

I hope that helps!
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Re: Findings from several studies on corporate mergers and acquisitions du  [#permalink]

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New post 04 Jun 2018, 00:12
GMATNinja wrote:
BinhFantasia wrote:
I can eliminate other answers to choose C but I can not understand why C is true. Are "professed goals" = level of profitability? Is it common knowledge?

Quote:
"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."

"Yet mergers and acquisitions remain common, and bidders continue to assert that their objectives are economic ones." - The bidders (i.e. the acquiring firms) assert (or profess) that the deals will benefit their firms economically.

But the "second study concluded that post-acquisition gains to most acquiring firms were not adequate to cover the premiums paid to obtain acquired firms." If the premiums paid exceed the post-acquisition gains, then the firm would have lost money on the deal. Obviously this would not benefit the firm economically.

The bidders profess that they are doing the deals for economic reasons, but the study suggests that most bidding firms lose money on the deals. Thus, the outcomes of the deals do not fulfill the professed goals (economic gains) of the acquiring firms.

I hope that helps!



hello GMATNinja
I narrowed down to option C and E, but marked the wrong answer E.
of course the studies suggest that bidding firms are not making profits from the merger and acquisition. Shall not the study discourage new merger and acquisitions?
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Re: Findings from several studies on corporate mergers and acquisitions du  [#permalink]

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New post 27 Jun 2018, 11:48
Quote:
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?

(C) They do not fulfill the professed goals of most acquiring firms.
(E) They discourage many such firms from attempting to make subsequent bids and acquisitions.


Quote:
hello GMATNinja
I narrowed down to option C and E, but marked the wrong answer E.
of course the studies suggest that bidding firms are not making profits from the merger and acquisition. Shall not the study discourage new merger and acquisitions?

The question specifically asks about the outcomes of corporate mergers and acquisitions with respect to acquiring firms.

Immediately after the author cites three studies that raise questions challenging why firms should initiate and consummate mergers and acquisitions, the author says:

    Yet mergers and acquisitions remain common, and bidders continue to assert that their objectives are economic ones.

If mergers and acquisitions remain common, then the findings cited in the passage are not discouraging firms from initiating and consummating them. The author may intend to discourage acquiring firms, but despite the findings from studies cited, this outcome has not been achieved. For this reason alone we eliminate choice (E). But as you've noted, choice (C) is much more strongly supported by the passage, so in a contest between these two choices, (C) wins easily.

I hope this helps!
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Re: Findings from several studies on corporate mergers and acquisitions du  [#permalink]

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New post 12 Jul 2018, 05:12
GMATNinja wrote:
Quote:
(E) Factors other than economic benefit to the acquiring firm help to explain the frequency with which they occur.

The factors cited in the final two sentences are possible explanations for the acquisitions. None of these describe situations that would benefit the firm, so choice (E) is the best answer.

I hope that helps!


Hi GMATNinja,

I think i do not absolutely understand "frequency" in choice E,
IMO, a part of the passage states why appeal acquisitions, but does not invlove the frequency of acquisitions,
would you please clarify further.

Thanks in advance

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Re: Findings from several studies on corporate mergers and acquisitions du  [#permalink]

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New post 03 Aug 2018, 12:56
zoezhuyan wrote:
GMATNinja wrote:
Quote:
(E) Factors other than economic benefit to the acquiring firm help to explain the frequency with which they occur.

The factors cited in the final two sentences are possible explanations for the acquisitions. None of these describe situations that would benefit the firm, so choice (E) is the best answer.

I hope that helps!


Hi GMATNinja,

I think i do not absolutely understand "frequency" in choice E,
IMO, a part of the passage states why appeal acquisitions, but does not invlove the frequency of acquisitions,
would you please clarify further.

I'm happy to clarify further, zoezhuyan.

As we've reviewed before, the passage states:
Quote:
Yet mergers and acquisitions remain common, and bidders continue to assert that their objectives are economic ones.

And here's choice (E) again:
Quote:
(E) Factors other than economic benefit to the acquiring firm help to explain the frequency with which they occur.

If mergers and acquisitions are a common practice, then they take place regularly. This is a kind of frequency. So (E) essentially states, "Factors other than economic benefit to the acquiring firm help to explain how often they occur."

You can think the same way when saying that a practice is uncommon, irregular, or atypical; these are all ways of saying that a practice doesn't happen often. Choice (E) is stating that these alternate factors help to explain why mergers and acquisitions remain common, and that's why it's the best choice available.
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Re: Findings from several studies on corporate mergers and acquisitions du &nbs [#permalink] 03 Aug 2018, 12:56

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