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Unformatted text preview: Chapter 7: Acquisition and Restructuring Strategies Chapter 7 Acquisition and Restructuring Strategies KNOWLEDGE OBJECTIVES 1. Explain the popularity of merger and acquisition strategies in firms competing in the global economy. 2. Discuss reasons why firms use an acquisition strategy to achieve strategic competitiveness. 3. Describe seven problems that work against achieving success when using an acquisition strategy. 4. Name and describe attributes of effective acquisitions. 5. Define the restructuring strategy and distinguish among its common forms. 6. Explain the short- and long-term outcomes of the different types of restructuring strategies. CHAPTER OUTLINE Opening Case Global Merger and Acquisition Activity During a Global Crisis THE POPULARITY OF MERGER AND ACQUISITION STRATEGIES Mergers, Acquisitions, and Takeovers: What Are the Differences? REASONS FOR ACQUISITIONS Increased Market Power Overcoming Entry Barriers Cost of New Product Development and Increased Speed to Market Strategic Focus The Increasing Use of Acquisition Strategies by Chinese Firms as a Means of Gaining Market Power in a Particular Industry Lower Risk Compared to Developing New Products Increased Diversification Strategic Focus Pfizer’s Proposed Acquisition of Wyeth: Will this Acquisition be Successful? Reshaping the Firm’s Competitive Scope Learning and Developing New Capabilities PROBLEMS IN ACHIEVING ACQUISITION SUCCESS Integration Difficulties Inadequate Evaluation of Target Large or Extraordinary Debt Inability to Achieve Synergy Too Much Diversification Managers Overly Focused on Acquisitions Too Large EFFECTIVE ACQUISITIONS RESTRUCTURING Downsizing Downscoping Leveraged Buyouts Restructuring Outcomes SUMMARY REVIEW QUESTIONS EXPERIENTIAL EXERCISES VIDEO CASE NOTES 7-1 Chapter 7: Acquisition and Restructuring Strategies LECTURE NOTES Chapter Introduction : With continued merger and acquisition activity, this chapter is very important. Much of the chapter’s material is summarized in Figure 7.1 , which can be used to help students mentally organize what they learn in the chapter about mergers and acquisitions by examing reasons of acquisitions and problems in achieving success. OPENING CASE Global Merger and Acquisition Activity During a Global Crisis Cross-border M&A activity increased during the 1990s and into the early part of the twenty-first century. Companies engaging in this activity can realize that rapid growth – both in domestic and foreign markets. In addition, societies benefit because this activity eliminates weak firms and wrings out excess capacity. M&A activity tends to be cyclical and is influenced heavily by conditions in the external environment. The recent downturn is attributed to the global economic crisis that began in 2008. The value of global M&A activity dropped from $42 trillion in 2007 to $29 trillion in 2008 and the value of M&A in the first three months of 2009 was down 77 percent from the same quarter a year earlier. months of 2009 was down 77 percent from the same quarter a year earlier....
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This note was uploaded on 10/21/2011 for the course ACCOUNTING 101 taught by Professor Fenjimo during the Spring '11 term at College of Southern Idaho.
- Spring '11