searching for viable acquisition candidates completing effective due diligence

Searching for viable acquisition candidates

This preview shows page 107 - 109 out of 133 pages.

- searching for viable acquisition candidates - completing effective due diligence processes - preparing for negotiations - managing the integration process after completing the acquisition Company experiences show that participating in and overseeing the activities required for making acquisitions can divert managerial attention from other matters that are necessary for long term competitive success Managers can become overly involved in the process of making acquisitions 7.3g Too Large Size can also increase the complexity of the managerial challenge and create diseconomies of scope - not enough benefit to outweigh the costs of managing the more complex organization created through acquisitions The complexities generated by the larger size often lead managers to implement more bureaucratic controls to manage the combined firms’ operations Bureaucratic controls are formalized supervisory and behavioral rules and policies designed to ensure consistency of decisions and actions across a firm’s units Managers should avoid allowing their firm to get to a point where acquisitions are creating a degree of size that increases its inefficiency and ineffectiveness 7.4 Effective Acquisitions The probability of being able to create value through acquisitions increases when the nature of the acquisition and the processes used to complete it are consistent with the “Attributes of successful acquisitions” In effective acquisitions, targets are often selected and groomed by establishing a working relationship prior to the acquisition Research shows that friendly acquisitions facilitate integration of acquiring and acquired firms 107 | P a g e
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Additionally, effective due diligence processes involving the deliberate and careful selection of target firms and an evaluation of the relative health of those firms contribute to successful acquisitions Financial slack in the form of debt equity or cash, in both the acquiring and acquired firms, also frequently contributes to acquisition success Another attribute of successful acquisition strategies is an emphasis on innovation Flexibility and adaptability are the final 2 attributes of successful acquisitions 7.5 Restructuring Restructuring is a strategy through which a firm changes its set of businesses or its financial structure - a global phenomenon - firms focus on fewer products and markets Although restructuring strategies are generally used to deal with acquisitions that are not reaching expectations, firms sometimes use restructuring strategies b/c of changes they have detected in their external environment 7.5a Downsizing Downsizing is a reduction in the number of a firm’s employees and, sometimes, in the number of its operating units; but, the composition of businesses in the company’s portfolio may not change through downsizing An international managerial strategy that is used for the purpose of improving firm performance
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