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ACQUISITIONS AND
RESTRUCTURING STRATEGIES
Merger
Acquisition
Takeover
A special type of acquisition when the target firm did not solicit
the acquiring firms bid for outright ownership
ACQUISITIONS:
INCREASED MARKET POWER
When
When
ACQUISITIONS:
INCREASED MARKET POWER (CONTD)
acquisitions
Vertical
acquisitions
Related
acquisitions
Acquisition of a supplier or
distributor of one or more
of the firms goods or
services
Increases a firms market
power by controlling
additional parts of the
value chain
Acquisition of a company
in a highly related industry
Because of the difficulty in
implementing synergy,
related acquisitions are
often difficult to implement
Microsoft- Nokia
Synergy - Whole is
greater than the sum of
its parts
7
ACQUISITIONS:
OVERCOMING ENTRY BARRIERS
of scale
Differentiated
products
Cross-Border Acquisitions
Purchase
university with no Law department can acquire another university which has
a law department, and hence can continue with the law department service.
With the help of the acquired firm, company can develop new products more
efficiently.
A
Bakery shop can acquire another bakery shop and with the help of the
acquired firms expertise in baking
Returns
10
An acquisition can:
Reduce
Reduce
An acquiring firm can gain capabilities that the firm does not currently
possess:
Special technological capability
Broaden a firms knowledge base
Reduce inertia
Firms should acquire other firms with different but related and
complementary capabilities in order to build their own knowledge
base
A
Building
Resolving
Loss
Due Diligence
The
DUE DILIGENCE
17
Over diversification may result in decline in performance; each firm has different
capabilities to manage diversification; because of over diversification, smaller
numbers of business units are created and managing those large number of small
units may become complicated.
Scope created by diversification may cause managers to rely too much on financial
rather than strategic controls to evaluate business units performances ( when they
dont have rich understanding of target firms business/objectives and values.
Managers
over dependence on financial control mechanism such as ROI may prioritize only
those businesses which have short term returns and may discourage long term investments.
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ATTRIBUTES OF
SUCCESSFUL
ACQUISITIONS
Table 7.1
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RESTRUCTURING
Let people buy the items which are not right for you.
Restructuring strategies:
Downsizing
Downscoping
Leveraged
buyouts
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TYPES OF RESTRUCTURING:
DOWNSIZING
TYPES OF RESTRUCTURING:
DOWNSCOPING
RESTRUCTURING: LEVERAGED
BUYOUTS