Growth Strategies, Mergers, Acquisitions and Alliances

Question 1

What are some motives for mergers and acquisitions?

Answer 1

1. Managerial Motives
   - top management renumeration depends more on firm size than profitability
   - psychological rewards
   - imitation: fear of not participating in an industry merger wage.
2. Financial Motives
   - stock market inefficiencies i.e. acquiring undervalued companies
   - quest for tax savings
   - financial re-engineering i.e. debt financed acquisitions
3. Strategic motives

• Horizontal i.e. economies of scale and market power
• Geographical extensions – enter overseas market
• Vertical – acquire supplier or customer
• Diversifying – to enter a new area of business.

Question 2

Strategic Alliances and Joint Ventures, What are they?

Answer 2

Strategic Alliances:
Collaboration between two or more firms to create value

Joint Venture:
Partners form a jointly owned enterprise

Question 3

What are some Motives and challenges for strategic alliances?

Answer 3

Motives:

• Utilize extended basis of resources and capabolities
• Risk Sharing

Challenges:

• Needs to be relational compatabilities
• Equal sharing of benefits