The acquirer should exhibit skill in execution must

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The acquirer should exhibit skill in execution . Must not drive the share price up to more than fair value or won’t receive any return/benefit. 7 – Reducing the cost of new product development - Attractive alternative to developing new products internally – high cost and time requirements - Especially popular in the technology and medicine industries – high R&D costs - This provides a guarantee since its already on the market, internal product development is much higher risk - By acquiring a company immediate access to the market gain a products that already has a consumer and sales base 8 – Learning and developing new capabilities - Gain access to capabilities that the company currently doesn’t possess ( R&D or technological advances) - Gains new knowledge that can benefit current products too - Can adopt these capabilities if similar properties to the target 9 – Restructuring - This is the changing of the composition of a company’s set of subsidiaries and/or capital structure - Can involve down-sizing : primarily done to reduce costs by laying-off employees or eliminating units. down-scoping : this is done to reduce the level of unrelatedness in a company. - Companies restructure due to changes in internal and external environments - Down-sizing was previously seen as a sign of decline – now however is accepted as a strategy. - Most often engage in down-sizing to increase profits through cost reduction - Down-scoping has a more positive impact on performance than down-sizing – divestitures, spin-offs * focus on the core factors of the entity. Conclusion - Never consider M&A transactions in a vacuum - Must consider the transaction in terms of company’s generic and grand strategies (increase chance of success) - Strategy is most important during times of economic downturn. 7 | P a g e
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