Chapter 25: Problem 18

Which statement is true? (LO4, 7) a) Conglomerate mergers are all vertical mergers. b) General Electric is the largest conglomerate in the United States. c) There is no discernable trend toward corporate bigness. d) Most of the largest corporate mergers in the world are between firms located outside the United States.

Short Answer

Expert verified

The correct answer is D: "Most of the largest corporate mergers in the world are between firms located outside the United States."

Step by step solution

Define Conglomerate Merger and Vertical Merger

To solve this problem, we have to know the meaning of the terms presented. A conglomerate merger is defined as a merger between two or more businesses that operate in completely different industries. On the other hand, a vertical merger is a type of merger between companies that are at different stages of the same production process but operate in the same industry.

Analyze Statement A

Statement A says, "conglomerate mergers are all vertical mergers." We know that this statement is not true because conglomerate mergers are between businesses from different industries, whereas vertical mergers occur between companies in the same industry, but at different stages of production. Therefore, this statement is false.

Analyze Statement B

Statement B says, "General Electric is the largest conglomerate in the United States." While General Electric (GE) is indeed a large conglomerate that operates across various industries, it is not the largest conglomerate in the United States. Berkshire Hathaway, run by Warren Buffett, is currently the largest conglomerate in the US. Therefore, this statement is false.

Analyze Statement C

Statement C says, "there is no discernable trend toward corporate bigness." We can confidently state that it is false because there has been a clear trend toward larger corporations in various industries, with companies merging or acquiring other companies to expand their market share and reach. Therefore, this statement is false.

Analyze Statement D

Statement D says, "most of the largest corporate mergers in the world are between firms located outside the United States." Analyzing global corporate mergers, we can see that many of the largest mergers in recent years have indeed involved firms outside the United States. This trend highlights the increasing globalization and interconnectedness of businesses. Therefore, this statement is true.

Conclusion

Based on our analysis, the true statement is D: "Most of the largest corporate mergers in the world are between firms located outside the United States."