sTargets(45p) - Lecture Overview: M&A Targets Value Gap...

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Slide 1 ‘Value Gap’ Strategic Business Units Looking for synergies Organizing for target integration
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Slide 2 The ‘Value Gap’ Definition : Difference between what current market value of a share of stock and the value of that share if the company were managed as though the current owners were the only constituency that mattered.
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Slide 3 "Corporate raiders, sir . . . one, maybe two companies away."
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Slide 4 Sources of the Gap 1) Opportunities for improved operations. 2) Untapped capacity for leverage. 3) Potential economic benefits to new owners of company assets that are less valuable to the current company owners. 4) Generally, see the “Rationale” and “Vertical Integration” lecture.
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Slide 5 Business Portfolio Management Product portfolio McKinsey’s matrix Boston Consulting Group’s matrix Other tools
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Slide 6 Steps in the SBU approach 1) Divide the company into SBUs and assess each ones LT prospects 2) Compare SBUs by means of a matrix of some type 3) Develop strategic objectives for each SBU
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Slide 7 McKinsey’s Market Attractiveness vs Business Position Matrix Industry Attractiveness Business Strength Low Med High High Medium Low Invest/ Grow Selective/ Earnings Harvest/ Divest Size, growth, diversity,structure, profits, etc. Size,growth,share,position,profit,etc.
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Slide 8 Matrix analysis Product-market matrix Competitive-position matrix Present Related Unrelated Present Low Risk High Risk Related Unrelated High Risk Highest Risk Product Market Product Differentiation Cost Leadership Narrow Focus Broad Range of Markets
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Slide 9 Global strategy Country Attractiveness High Medium Low High Invest / Grow Medium Low Harvest / Divest Business Strengths High local responsiveness High Cost Pressure Low Cost Pressure Low local responsiveness See a later slide for model
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Slide 10 Market Growth Rate Relative Market Share High Low Low High Stars Cash Cow Question Marks Dogs BCG Matrix
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Slide 11 BCG Cash Flow Management (careful) 2) Divest weakest ‘?’ 3) Exit dogs 4) Balance the portfolio
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Slide 12 BCG assumptions Price/Cost advantage derives from relative size Relative market growth signals opportunity to gain share
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Slide 13 BCG Cash Flow Management Advice BCG has come under criticism because of the relationship between the underlying economic model and its applicability to the the wide array of industries to which it is applied. BCG is a good example of a model based on research in
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sTargets(45p) - Lecture Overview: M&A Targets Value Gap...

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