MGT3170 Lecture13-MA Strategies-2015-print - MGT 3170 Strategic Management Lecture 13 Merger Acquisition Strategies Jas Ahmad Learning objectives

MGT3170 Lecture13-MA Strategies-2015-print - MGT 3170...

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MGT 3170 Strategic Management Merger & Acquisition Strategies Jas Ahmad Lecture 13
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Learning objectives lecture 13 Assess the use of merger and acquisition strategies in firms competing in the global economy Discuss reasons why firms use an acquisition strategy to achieve strategic competitiveness Evaluate problems with using an acquisition strategy Identify the attributes of effective acquisitions Outline restructuring strategy Identify the short- and long-term outcomes of the different types of restructuring strategies. Explain the relevance of these issues to the coursework assignment. By the end of this lecture you will be able to:
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Mergers, Acquisitions, and Takeovers Merger A strategy through which two firms agree to integrate their operations on a relatively co-equal basis Acquisition A strategy through which one firm buys a controlling, or 100% interest in another firm with the intent of making the acquired firm a subsidiary business within its portfolio Takeover A special type of acquisition when the target firm did not solicit the acquiring firm’s bid for outright ownership
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Reasons for Acquisitions Acquisitions Cost new product development/increased speed to market Increased diversification Increased market power Avoiding excessive competition Overcoming entry barriers Learning and developing new capabilities Lower risk compared to developing new products
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Acquisitions: Increased Market Power Factors increasing market power When a firm is able to sell goods or services above competitive levels When costs of primary or support activities are below those of competitors When a firm’s size, resources and capabilities gives it a superior ability to compete Acquisitions intended to increase market power are subject to: Regulatory review Analysis by financial markets
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Market Power Acquisitions Acquisition of a company in the same industry in which the acquiring firm competes increases a firm’s market power by exploiting: Cost-based synergies Revenue-based synergies Acquisitions with similar characteristics result in higher performance than those with dissimilar characteristics Horizontal Acquisitions
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Market Power Acquisitions Acquisition of a supplier or distributor of one or more of the firm’s goods or services Increases a firm’s market power by controlling additional parts of the value chain Horizontal Acquisitions Vertical Acquisitions
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Market Power Acquisitions Acquisition of a company in a highly related industry Because of the difficulty in implementing synergy, related acquisitions are often difficult to implement Horizontal Acquisitions Vertical Acquisitions Related Acquisitions
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