Lesson 2.1.1b

2.1.1b External (inorganic) growth: merger and takeover Quiz: Pearson Edexcel Business, Unit 6

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 2.1.1b, External (inorganic) growth: merger and takeover: 20 multiple choice questions for the Pearson Edexcel GCSE Business (1BS0), Unit 6: Growing the business, written with Revision Ninja.

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The 20 questions

  1. What term describes growth achieved by combining with or acquiring another business?

    • Organic growth
    • External growth
    • Internal growth
    • Natural growth

  2. When two businesses voluntarily agree to combine to form one new firm, what is it called?

    • A takeover
    • A liquidation
    • A franchise
    • A merger

  3. What transaction occurs when one business buys a majority shareholding to gain control of another?

    • A flotation
    • A joint venture
    • A merger
    • A takeover

  4. Which of these is a method of external growth?

    • Acquiring a rival
    • Launching a new product
    • Investing retained profit
    • Opening a new branch

  5. When a bidder offers shareholders more than the current share price, the extra amount is called:

    • a dividend
    • a premium
    • a tariff
    • a royalty

  6. What term describes a takeover that the target company's board of directors opposes?

    • Agreed acquisition
    • Friendly merger
    • Hostile takeover
    • Joint venture

  7. Which stakeholder group most frequently faces redundancy after a corporate merger?

    • Suppliers
    • Customers
    • Shareholders
    • Employees

  8. What is a major advantage of achieving growth through a takeover rather than organically?

    • Faster market share gain
    • Zero integration risk
    • Lower upfront costs
    • Guaranteed future profits

  9. Firm A has a 20% market share and Firm B has 15%. After a merger with no customers gained or lost, what is the combined market share?

    • 17.5%
    • 30%
    • 35%
    • 40%

  10. A target's shares trade at £2.00 each and a bidder offers £2.50 per share. What is the premium per share?

    • £4.50
    • £2.50
    • £0.25
    • £0.50

  11. What main benefit do firms gain from increased purchasing power after merging with a rival?

    • Higher employee wages
    • Lower customer demand
    • Lower unit costs
    • Increased tax rates

  12. Why might a traditional retailer choose to take over an established e-commerce business?

    • Avoiding corporation tax
    • Fast online access
    • Eliminating all debt
    • Reducing physical space

  13. What is a likely immediate local impact of a takeover resulting in a factory closure?

    • Increased local spending
    • Job losses
    • Higher local wages
    • More business startups

  14. How might consumers be affected when a merger reduces the number of market competitors?

    • Reduced choice
    • Better customer service
    • Higher product quality
    • Lower prices

  15. What major internal issue arises when staff cultures clash following a corporate takeover?

    • Instant synergy
    • Integration problems
    • Reduced borrowing
    • Automatic cost savings

  16. A business's profit before interest is £0.5m and it pays £0.4m interest on a loan used for a takeover. What is profit after interest?

    • £0.4m
    • £5.5m
    • £0.1m
    • £0.9m

  17. A target's shares trade at £3.20 and a bidder offers £3.80 per share. What is the premium as a percentage of the market price?

    • About 3%
    • About 19%
    • About 119%
    • About 25%

  18. What is the most frequent reason why mergers fail to deliver their anticipated benefits?

    • Clashing corporate cultures
    • Excessive product demand
    • Too many shareholders
    • Insufficient market size

  19. Which factor represents a major trade-off of growing via takeover instead of organically?

    • Lower financial debt
    • Higher integration risk
    • Slower market entry
    • Zero restructuring costs

  20. A firm pays £40m for a rival whose net assets are valued at £25m. How much is paid above the value of the net assets?

    • £40m
    • £15m
    • £65m
    • £25m

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