3.2.2 Mergers and Takeovers Flashcards
Inorganic growth
growth within a company that is created through mergers and takeovers or through opening new locations.
Merger
When two or more businesses agree to unite and operate as one business
Takeover
The process of buying another business
Mergers are Takeovers are both what
Corporate strategies
Takeover
the process of buying another business
What are the two types of takeovers?
1) Friendly takeover
2) Hostile takeover
Friendly takeover
When a business maybe struggling so invite a takeover.This is known as a ‘white knight’ as they come into rescue.
Hostile takeover
When the board of directors try to resist the takeover but another business buys 51% of shares.It isn’t really welcomed
What type of business can get taken over
A public limited company
Difference between merger and takeover
Merger is the when two or more businesses agree to join together to operate one whereas a takeover is when a business buys another business
7 Advantages of merging
S
EOS
IR & MS
Trent
Diversity
Unique
Internationals
- Explotation of synergies
- Achieve EOS e.g bulk buying
- increased revenue & Market Share
- Cross selling
- diversification
-Acquiring unique capabilities and resources
- International expansion
Tactical reason
3 Tactical reasons for mergers/takeovers
-Ensure an increase in market share
-Access to new technology
-Access to staff
Strategic reasons
3 strategic reasons
-Access to new markets
-Improved distribution networks
-Improved brand
4 financial risks of merging/takeovers
(Financial risks)
- Original purchase costs
- Costs if it all goes wrong (read slide)
- Redundancies of duplicate staff e.g 2 finance managers. -> If redundancies are on a larger scale, employees might go on strike.This can disrupt productivity.
-Integration costs: Have to physically integrate the two organisations
-can be complex, expensive & time consuming
Costs incurred are resulted from thing such as :
organisational & personnel changes, severance pay, staff training, system changes
