Define the term takeover.

Mark scheme

Marking points from the official mark scheme (May/June 2024). The mark or mark type is shown in brackets.

1. [2] (a) A takeover is when one business/investor buys / acquires / controls / absorbs / integrates another business, often by buying a majority stake in the target company.
2. [1] (a) Purchasing a business
3. [1] (b) May require considerable additional expenditure
4. [1] (b) May lead to increased debt
5. [1] (b) May cause problems for existing management
6. [1] (b) Might lead to loss of control of core business
7. [1] (b) Disruptive to original business – culture clash
8. [1] (b) Growth may be too rapid – diseconomies of scale
9. [1] (b) May be more regulations/different management culture in a different market
10. [2] (b) Can be very expensive to take over another business – which could raise business costs.
11. [2] (b) Managers may lack the experience to deal with a different business – which could lead to poor decision making and inefficiency.
12. [2] (b) Can lead to loss of control of the business – especially if it is a hostile takeover.
13. [2] (b) Can lead to culture clashes – whereby employees may find it difficult to adapt and leave.
14. [2] (b) Different management styles may be incompatible – which can make decision making difficult.
15. [2] (b) May need to adapt different marketing strategies – which can be very expensive.
16. [2] (b) Can lead to an increase in long-term debt – which can lead to a higher gearing ratio.
17. [2] (b) Can lead to regulatory problems – whereby the government may prevent a merger or takeover from happening.