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    Strategic Management

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    VijayKumar Nishad
    This document provides an overview of mergers and acquisitions. It defines mergers, acquisitions, and takeovers. It discusses the advantages such as reduced costs and increased market share. Potential disadvantages include difficulty obtaining shareholder approval and integration challenges. The document outlines different types of mergers and acquisitions such as horizontal, vertical, and conglomerate. It lists common reasons companies pursue acquisitions like market power, entry barriers, and diversification. Finally, it discusses problems that can arise with acquisitions like inadequate target evaluation, excessive debt, and failure to achieve synergies.

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    Strategic Management

    Uploaded by

    VijayKumar Nishad
    180 views14 pages
    This document provides an overview of mergers and acquisitions. It defines mergers, acquisitions, and takeovers. It discusses the advantages such as reduced costs and increased market share. Potential disadvantages include difficulty obtaining shareholder approval and integration challenges. The document outlines different types of mergers and acquisitions such as horizontal, vertical, and conglomerate. It lists common reasons companies pursue acquisitions like market power, entry barriers, and diversification. Finally, it discusses problems that can arise with acquisitions like inadequate target evaluation, excessive debt, and failure to achieve synergies.

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    This document provides an overview of mergers and acquisitions. It defines mergers, acquisitions, and takeovers. It discusses the advantages such as reduced costs and increased market share. Potential disadvantages include difficulty obtaining shareholder approval and integration challenges. The document outlines different types of mergers and acquisitions such as horizontal, vertical, and conglomerate. It lists common reasons companies pursue acquisitions like market power, entry barriers, and diversification. Finally, it discusses problems that can arise with acquisitions like inadequate target evaluation, excessive debt, and failure to achieve synergies.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    180 views14 pages

    Strategic Management

    Uploaded by

    VijayKumar Nishad
    This document provides an overview of mergers and acquisitions. It defines mergers, acquisitions, and takeovers. It discusses the advantages such as reduced costs and increased market share. Potential disadvantages include difficulty obtaining shareholder approval and integration challenges. The document outlines different types of mergers and acquisitions such as horizontal, vertical, and conglomerate. It lists common reasons companies pursue acquisitions like market power, entry barriers, and diversification. Finally, it discusses problems that can arise with acquisitions like inadequate target evaluation, excessive debt, and failure to achieve synergies.

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    You are on page 1of 14

    TOPIC NAME

    Mergers and Acquisitions


    STUDENTS NAME : Vijaykumar Nishad 23 Ashwini Jagtap 13 Mahendra Jain 15 Aamir Kapoor 17 Nozer Khan 19

    Ch7-1

    The Strategic Management Process


    External Analysis Strategic Choice

    Mission

    Objectives

    Strategy Implementation

    Competitive Advantage

    Internal Analysis

    Which Businesses to Enter? Corporate Level Strategy

    Vertical Integration Diversification


    Mode of Entry? Strategic Alliances Mergers & Acquisitions
    Ch7-2

    Mergers and Acquisitions


    Merger
    A transaction where two firms agree to integrate their operations on a relatively coequal basis because they have resources and capabilities that together may create a stronger competitive advantage

    Acquisition
    A transaction where one firm buys another firm with the intent of more effectively using a core competence by making the acquired firm a subsidiary within its portfolio of businesses

    Takeover
    An acquisition where the target firm did not solicit the bid of the acquiring firm
    Ch7-3

    Mergers & Acquisitions Defined

    Parent stocks are usually

    Can be a controlling

    retired and new stock issued


    Name may be one of the

    parents or a combination
    One of the parents usually

    Can be friendly or hostile

    share, a majority, or all of the target firms stock

    emerges as the dominant management

    Usually done through

    a tender offer
    Ch7-4

    Advantages of Mergers & Acquisitions


    1- Merger is legally simple and does not cost much . 2- A merger does not require cash. 3- A merger allows the shareholders of smaller entities to own a smaller piece of a larger pie, increasing their overall net worth.

    4- A merger allows the acquirer to avoid many of the costly and time-consuming aspects of asset purchases.
    5- Reducing your costs , overheads and competition.
    Ch7-5

    Disadvantages of Mergers & Acquisitions


    1- merger must be approved by a vote of the stockholders of each firm . 2-obtaining the necessary votes can be timeconsuming and difficult .

    3- M&A activity is a relatively high risk of failure.


    4- Diseconomies of scale if business becomes too large, which leads to higher unit costs.

    Ch7-6

    Types of Mergers
    Horizontal merger - Two or more firms from the same field. Vertical merger - Integration of companies with supplementary relationship. Conglomerate merger - Unification of different kinds of businesses under one flagship company.

    Ch7-7

    Types of Acquisitions
    Friendly - Management of both the companies agree mutually for takeover.

    Hostile An aggressive firm tries to acquire the firm against the latters desire. Linked with poor management and performance. In cases where chances of making profits exceed the cost of takeover considerably. Promoters with less than 50% stake.
    Ch7-8

    Reasons for Acquisitions


    Increased market power Overcome entry barriers Cost of new product development Increased speed to market Lower risk compared to developing new products Increased diversification Avoid excessive competition

    Problems in Achieving Success


    Integration difficulties Inadequate evaluation of target Large or extraordinary debt

    Acquisitions

    Inability to achieve synergy Too much diversification Managers overly focused on acquisitions Too large

    Ch7-9

    Reasons for Acquisitions


    Increased Market Power
    Acquisition intended to reduce the competitive balance of the industry Example: British Petroleums acquisition of U.S. Amoco

    Overcome Barriers to Entry


    Acquisitions overcome costly barriers to entry which may make start-ups economically unattractive Example: Belgian-Dutch Fortis acquisition of American Bankers Insurance Group

    Lower Cost and Risk of New Product Development


    Buying established businesses reduces risk of start-up ventures Example: Watson Pharmaceuticals acquisition of TheraTech Ch7-10

    Reasons for Acquisitions


    Increased Speed to Market
    Closely related to Barriers to Entry, allows market entry in a more timely fashion Example: Kraft Foods acquisition of Boca Burger

    Diversification
    Quick way to move into businesses when firm currently lacks experience and depth in industry Example: CNETs acquisition of mySimon

    Reshaping Competitive Scope


    Firms may use acquisitions to restrict its dependence on a single or a few products or markets Example: General Electrics acquisition of NBC
    Ch7-11

    Problems with Acquisitions


    Integration Difficulties
    Differing financial and control systems can make integration of firms difficult Example: Intels acquisition of DECs semiconductor division

    Inadequate Evaluation of Target


    Winners Curse bid causes acquirer to overpay for firm Example: Marks and Spencers acquisition of Brooks Brothers

    Large or Extraordinary Debt


    Costly debt can create onerous burden on cash outflows Example: AgriBioTechs acquisition of dozens of small seed firms
    Ch7-12

    Problems with Acquisitions


    Inability to Achieve Synergy
    Justifying acquisitions can increase estimate of expected benefits Example: Quaker Oats and Snapple

    Overly Diversified
    Acquirer doesnt have expertise required to manage unrelated businesses Example: GE--prior to selling businesses and refocusing

    Managers Overly Focused on Acquisitions


    Managers may fail to objectively assess the value of outcomes achieved through the firms acquisition strategy Example: Ford and Jaguar

    Too Large
    Large bureaucracy reduces innovation and flexibility
    Ch7-13

    Ch7-14

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