sVertInt(38p) - Economic Theory of Vertical Integration The...

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Economic Theory of Vertical Integration The M&A integration question
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Outline Challenges of integrating new firms Implications of economic theory Evaluating the trade-offs
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Integrating new firms Cultural challenges of new firm integration Banc One experience Banc One approach used
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See how it fits corporate strategy Significant fixed costs amortized Fixed costs MICS Visa ATM => EDP Geographical Expansion Putting the ‘c’ in Banc One
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Integrating new firms Banc One Pre-acquisition Find targets interested in Banc One benefits Work with management team to sell Banc One Open phone book Assign mentor Training for employees At Acquisition Name change day Post-acquisition Quarterly videos Active mentoring related to performance evaluation
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Integration Have to plan for employee acceptance Have to manage employee culture Products and services roll-out
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Evaluating the trade-offs Transaction Costs and Vertical Integration What is a “transaction cost” How does it affect ownership Trade-off of strategic versus economizing effects
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Economic theory of vertical integration (Vertical) Raw Materials Processing Sales & Distribution
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Economic theory of vertical integration (Horizontal) Raw Materials Processing Sales & Distribution Raw Materials Processing Sales & Distribution
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Example of vertical integration Raw Materials Processing Sales & Distribution Steel Fisher Auto Body GM Design Auto Body Parts Mfg.
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Integration How do you decide whether to Build or Buy capabilities? When to OWN the arrows,
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This note was uploaded on 04/02/2009 for the course DEPARTMENT FIN 4320 taught by Professor Sherwoodbishop during the Spring '08 term at Southwestern.

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sVertInt(38p) - Economic Theory of Vertical Integration The...

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