Question

You are the head of the corporate acquisitions team at a major biotech company in Atlanta, Georgia. Your team has identified a couple of attractive acquisition targets that you would like to recommend to the Board of Directors for consideration. However, before you make a recommendation, you want to make sure that none of the acquisitions will raise any regulatory issues. In order to evaluate all potential regulatory issues, which one of the following analytical actions should you have your team complete prior to making any recommendations?

A. Conduct a thorough due diligence review of the proposed acquisition targets.
B. Assess the financial viability and profitability of the acquisition targets.
C. Develop a marketing strategy for the potential acquisitions.
D. Negotiate the terms of the acquisitions with the target companies.

Answer 1

The correct analytical action to avoid regulatory issues in corporate acquisitions is to conduct a thorough due diligence review of the acquisition targets. The correct option is A.

Step-by-step explanation:

To ensure that none of the proposed acquisitions raise any regulatory issues, the head of the corporate acquisitions team should complete a thorough due diligence review of the proposed acquisition targets (Option A).

This review is vital for assessing potential regulatory and legal impediments that may arise from the acquisition, such as possible violations of antitrust laws.

The antitrust laws are designed to maintain competition in the market, which can be influenced by corporate mergers and acquisitions.

They prevent large firms from forming potentially monopolistic entities that could restrict competition. Other considerations such as financial viability, marketing strategy, and the terms of acquisition, while important, are secondary to ensuring that the acquisition complies with regulatory standards. The correct option is A.