Chapter 12 Flashcards
Strategic motives for M&As
Extension: M&A can be used to extend the reach of a firm in terms of geography, products or markets.
Consolidation: M&A can be used to consolidate the competitors in an industry. Increase market power, reduce competition, increase efficiencies and increased bargaining power.
Resources and capabilities: A third motive is to increase an acquirers resources and capabilities. For example, Sandviks acquisition of the battery specialist finish company Akkurate.
Tax efficiency: Profits and losses may be transferable to benefit from different tax regimes.
Asset stripping or unbundling: Some companies are effective at spotting other companies whose underlying assets are worth more than the proce of the company as a whole.
Managerial motives for M&As
Personal ambition: These can take different forms.
Bandwagon effects: When many other firms are making acquisitions, financial analysts and the business media may criticise more cautious managers for undue conservatism.
What three key factors should organisations consider when deciding between acquisition, alliance or organic methods of expansion?
(i) Urgency, (ii) Uncertainty, (iii) types of resources and capabilities
M&A processes
Integration => slow and steady as proposed by Tomas Eliasson.
Strategic fit and organisational fit. Synergies and dis-synergies.
Winners curse
Acquisitions are liable to the winners curse - in order to win acceptance of the bid, the acquirer may pay so much that the original cost can never be earned back.
Motives for alliances
Scale alliances: Economies of scale
Access alliances: Access capabilities that are required to produce a product or offer a service.
Complementary alliances: Combining distinctive resources or capabilities.
Collusive alliances: Secretly collude to increase market power. Combining into cartels reduce competition allows higher prices.
Neither partner is in control, alliances must be managed over time => co-evolution and trust is important.
