Wk 12 diversificatn Ch 6 rev. K

Wk 12 diversificatn Ch 6 rev. K - 6-1A study evaluated the...

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Unformatted text preview: 6-1A study evaluated the stock market reaction of 600 acquisitions over the period between 1975 and 1991. Acquiring firms suffered an average 4 percent drop in market value in the three months following the acquisitions announcement.In a study by Solomon Smith Barney of US companies acquired since 1997 in deals for US$15 billion or more, the stocks of the acquiring firms have, on average, underperformed the S&P stock index by 14 percentage points and underperformed their peer group by 4 percentage points after the deals were announced.2Corporate-Level Strategy: Creating Value through Diversification – Ch 6Learning Outcomes:Able to explain and relate how diversification creates valueAble to reflect on the means for a firm to diversify3BackgroundValue or cons of diversification, a corporate-level strategyHow corporations can use related diversification to achieve synergistic benefits through economies of scope and market power..4BackgroundHow corporations can use unrelated diversification to attain synergistic benefits through corporate restructuring, parenting, and portfolio analysis.The various means of engaging in diversification-mergers and acquisitions, joint ventures/strategic alliances, and internal development..5Making Diversification WorkDiversification initiatives must create value for shareholdersMergers and acquisitionsStrategic alliancesJoint venturesInternal developmentDiversification should create synergyBusiness 2Business 16SynergyRelated businesses (horizontal relationships)Sharing tangible resourcesSharing intangible resourcesBusinessBusiness2Business Business 1Production Production facilitiesfacilitiesDistribution Distribution channelschannelsFavorable Favorable reputationreputationPatents, Patents, copyrights, etc.copyrights, etc.Specialized Specialized skillsskillsManufacturing Manufacturing facilitiesfacilities7SynergyUnrelated businesses (hierarchical relationships)Value creation derives from corporate officeLeveraging support activitiesTechnology Technology developmentdevelopmentBusinesBusiness 2s 2BusinesBusiness 1s 1ProcurementProcurementInformation...
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This note was uploaded on 11/21/2010 for the course BBA ECON 4131 taught by Professor Profwong during the Spring '10 term at HKU.

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Wk 12 diversificatn Ch 6 rev. K - 6-1A study evaluated the...

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