Peng_Chapter 12

Peng_Chapter 12 - price and the market value of target...

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ALLIANCES AND ACQUISITIONS equity-based alliances  -  strategic investment; one partner  invests in another cross-shareholding  -  both partners invest in each other acquisitions  -  transfer of the control of operations and  management from one firm (target) to another (acquirer), the  former becoming a unit of the latter merger  -  combination of operations and management of two  firms to establish a new legal entity
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RESOURCES AND ALLIANCES VRIO Framework Value  alliances  -  must create value by reducing  costs, risks,  and uncertainties real option -  investment in real operations as     opposed to financial capital learning race -  competitive situation in which   partners aim  to outrun each other  by learning the “tricks” from  the           other side as fast as possible acquisition premium  -  difference between the  acquisition 
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Unformatted text preview: price and the market value of target firms ALLIANCES AND ACQUISITIONS How do firms choose between alliances and acquisitions? FORMATION OF ALLIANCES Stage One: To Cooperate or Not to Cooperate? Stage Two: Contract or Equity? Stage Three: Specifying the Relationship COMBATING OPPORTUNISM It is difficult to completely eliminate opportunism, but it is possible to minimize its threat by: (1) walling off critical capabilities, or (2) swapping critical capabilities through credible commitments Sometimes none of these approaches work, and the relationship deteriorates M&As + Alliances Given the high rates of M&A failures, it seems imperative that firms seriously and thoroughly investigate alliances as an alternative before embarking on acquisitions....
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Peng_Chapter 12 - price and the market value of target...

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