Certified Financial Management Specialist Practice Exam

What is the main objective of a consolidation in corporate acquisitions?

1. To absorb another firm via a merger

2. To increase market share and eliminate competition

3. To liquidate bankrupt companies

4. To expand into unrelated industries

The correct answer is: To increase market share and eliminate competition

The primary objective of a consolidation in corporate acquisitions is to enhance market share and eliminate competition, which is embodied in the choice provided. By consolidating two or more firms, companies aim to streamline operations, create a more formidable competitive position in the marketplace, and achieve economies of scale. This strategy typically leads to increased efficiencies, reduced costs, and improved profitability, as the combined entities leverage their resources and capabilities. The focus on increasing market share is crucial because a larger market presence can lead to greater influence over pricing, distribution, and customer relationship management. Additionally, reducing the number of competitors within the market can create opportunities for increased pricing power and improved margins. While other options involve various strategies related to corporate finance and management, they do not accurately capture the primary intent behind consolidations specifically. For instance, absorbing another firm is more directly aligned with mergers rather than the broader strategic goals of consolidation. Liquidating bankrupt companies and expanding into unrelated industries represent different strategic objectives that do not reflect the essence of consolidation in terms of market position and competition.