Chapter 12- Mergers & Acquisitions

Chapter 12- Mergers & Acquisitions - Chapter 12 Mergers...

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Chapter 12: Mergers and Acquisitions Mind Your Strategic Types (Chapter 1) Corporate strategy: Organizational-level decisions that focus on long-term survival: Restructuring: Includes turnaround, divestiture, liquidation, and bankruptcies (Ch. 10) Growth: Includes incremental, international, and mergers and acquisitions Stability: Maintains status quo Mergers: Post- Global Economic Crisis Mergers and acquisitions peaked in 2007 Buyers are typically focused on M&As to support growth strategies Sellers have become more reluctant to sell due to issues with valuations of organizations and the economic climate Definitions Ø Merger: The consolidation of two organizations into a single organization Ø Horizontal merger: The merging of two competitors Ø Vertical merger: The merger of a buyer and seller or supplier Ø Conglomerate merger: The merger of two organizations competing in different markets Ø Acquisition: The purchase of an entire company or a controlling interest in a company Ø Consolidation: Two or more organizations join and form a new organization Ø Takeover: One company acquiring another company Strategic Benefits Ø Operating synergy: The cost reduction achieved by economies of scale produced by a merger or acquisition Ø Vertical integration: The merger or acquisition of two organizations that have a buyer-seller relationship Ø Horizontal integration: The merger or acquisition of rivals Financial Benefits Organizations need to reduce the variability and risk of their cash flow Organizations often use “cash cows” to fund “star” operations All growth strategies have different tax implications Needs of the CEO or Managing Team Managers may pursue their personal interests at the expense of stockholders Often the motives of executives can be deemed unconscious
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Merger Methods Ø Hostile takeovers: Dramatic and complex; one company takes over control of another Ø Poison pills: Refers to the right of key players to purchase shares in the company at a discount , making the takeover extremely expensive White knights: Buyers who will be more acceptable to a targeted company Pac-Man: A defensive manoeuvre where the targeted company makes a counteroffer for the bidding firm The Success Rate of Mergers Only about 15 percent of all mergers (and acquisitions) successfully
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  • Winter '13
  • MelanieChaparian
  • merger, Ø Conglomerate merger, Ø Horizontal merger, Ø Vertical merger, Ø Merger

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