Lecture 7 M&As and Alliances

Lecture 7 M&As and Alliances - Lecture 7 Mergers &...

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Lecture 7 Strategic Alliances
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Is it worth it? The acquirer expects to make more from the  assets of the target firm than the target firm can  itself. Is it worth paying a premium for the target? JP Morgan Chase paid a 14.5% premium to acquire  Bank One New JPMC merged #3 and #6 to become #2 in assets  behind Citibank
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Changes in Regulations or Environment Deregulation in Banking Laws Increased merger activity, Some mergers defensive Revenue enhancements Diversification (leveraging or stretching capabilities) B1 (Bank One) Strong Midwest Presence, JPMC  Strong Northeast. Investments
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Increase market power Responding to powerful buyers/suppliers New JPMC renegotiated with suppliers after  merger Visa, IBM Cost savings Share the cost of new product development,  technology, capital expense Increased economies of scale and scope Job Elimination – JPMC eliminated 10,000 jobs
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Overcome entry barriers Honda’s acquisition of 50% stake in Chinese car plant Acquisitions help a firm reach minimum efficient scale without  increasing industry capacity Increase speed to market First mover advantages in setting technology standards, in 
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This note was uploaded on 02/22/2011 for the course MGMT 478 taught by Professor May during the Spring '11 term at South Carolina.

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Lecture 7 M&As and Alliances - Lecture 7 Mergers &...

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