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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Mergers and Acquisitions Airlines:  American and TWA, America West and US Airways, Delta and  Northwest, United and Continental. And most recently,  Southwest Airlines and AirTran. IT in 2010: Apple buys Quattro  (mobile ad)  for $275M VMWare bought Zimra  (cloud computing)  for $100M Iron Mountain bought Mimosa  (archiving solutions)  for 112M Automobiles: GM and U.S. government
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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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Lecture 7 M&As and Alliances - Lecture 7 Mergers...

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