7. Mergers and Acquisitions

Question 1

Purpose of M&A

Answer 1

To increase the firms strategic competitiveness and value

Question 2

Merger

Answer 2

Two firms agree to integrate operations on a relatively co-equal basis

Question 3

Acquisition

Answer 3

Firm buys controlling or 100% interest in another firm - intent subsidiary within the business portfolio

Question 4

Horizontal Acquisitions

Answer 4

Acquirer and Acquired compete in the same industries

Question 5

Vertial Acq.

Answer 5

Firm acquires a supplier or distributor

Question 6

Related Acq.

Answer 6

Acquires company in highly related industry, combining resources, leveraging core competencies and achieving economies of scope`

Question 7

M&A Key Problems

Answer 7

Inadequate evaluation of target.
Becoming too large
Additional costs may exceed the benefits of the economies of scale

Question 8

Effective Acquisitions

Answer 8

• Complementary Assets or resources
• Continue to invest in R&D
• Friendle acquistions

Question 9

Integration Issues

Answer 9

• Lack of Comms
• Fear of job loss
• Reduction (loss) power status control or prestige

Question 10

Alternative Approach: Partnerships - Benefits?

Answer 10

Value creation instead of value destruction for acquirer on average

Question 11

Integration

Answer 11

Same or similar resources
Reduction of costs by combining assets/activities

Question 12

Partnering

Answer 12

Complementary, superior or unique resoruces
Growth in rev by new markets/products
Collaborative Company