Skip to content

ACCA Strategic Professional · Advanced Financial Management · Acquisitions and mergers versus other growth strategies

Omega is deciding between acquiring Target outright and a strategic alliance with Target. Target's owner will accept either. Which statement correctly describes the trade-off?

An alliance offers lower commitment and greater flexibility than acquisition, but gives weaker control and exposes the firm to leakage of knowledge to the partner. Acquisition provides control but brings integration, cultural and funding burdens, and alliances need not form a separate entity.

  1. AAlliance gives greater flexibility and lower commitment, but weaker control and risk of knowledge leakage than acquisitionCorrect
  2. BAlliance gives full control over Target's resources, unlike acquisition
  3. CAcquisition avoids integration and cultural problems, unlike alliance
  4. DAlliance always creates a separate legal entity jointly owned by both parties

Explanation

Alliances need less capital and are easier to exit, but control is shared and partners may learn each other's know-how. Acquisition gives control but brings integration, cultural and financing burdens. Alliances are contractual and need not create a separate entity, unlike an equity joint venture.

Did you get it right without looking?

One question tells you little. A timed set on Acquisitions and mergers versus other growth strategies shows your real accuracy, how long you take and where you lose marks.

Practise Acquisitions and mergers versus other growth strategiesFree diagnostic mock

More Acquisitions and mergers versus other growth strategies questions