Question

pappelbon Enterprises recently acquired a chain of convenience stores offering both fuel and food. Pappelbon is now surprised and dismayed to find that the gas pumps have been poorly maintained and will need to be replaced at considerable expense. All of the following statements accurately reflect this EXCEPT: a. Pappelbon overpaid. b. Pappelbon did not fully evaluate the target. c. Pappelbon's management was overly focused on acquisitions. d. Pappelbon's due diligence was not fully effective.

Answer 1

Answer:

Pappelbon Enterprises

All of the following statements accurately reflect this EXCEPT:

c. Pappelbon's management was overly focused on acquisitions.

Explanation:

Acquisitions require effective due diligence to be performed on the target.  Due diligence involves a full evaluation of the company to be acquired.  The evaluation should have uncovered the poor maintenance culture of the acquiree.  When it is established that many of the gas pumps would need replacement, the acquisition cost should have been reduced accordingly. These steps will also enable the management to not overpay for the acquired entity.