Mergers, Acquisitions, Alliances Flashcards
Most acquisitions and alliances fail - True or false?
True
What is a merger?
two firms agree to integrate their operations on a relatively co-equal basis
What is an acquisition?
one firm buys a controlling, or 100% interest in another firm with the intent of making the acquired firm a subsidiary business within its portfolio
What is a takeover?
A special type of acquisition when the target firm did not solicit the acquiring firm’s bid for outright ownership
Reasons for acquisitions
1.Increase market power
2.Learn and develop new capabilities
3. Overcome entry barriers
4. Increase speed to market
5. Lower costs and risks of new product development
6. Increase diversification
Problems in Achieving Acquisition Success
- Too large
- Manager overly focused on acquisitions
- Too much diversification
- Extraordinary debt
- Inadequate target evaluation
- Integration Difficulties and inability to achieve synergy
What are modular synergies?
Resources are managed independently and pool only the results for greater profit. NONEQUITY ALLIANCES ARE BEST SUITED TO GENERATE THIS SYNERGY.
What are sequential synergies?
When one company completes its tasks and passes on the results to a partner to do its bit. The resources are sequentially interdependent. EQUITY-BASED ALLIANCES ARE BETTER SUITED TO GENERATE THIS SYNERGY.
What are reciprocal synergies?
Working closely together and executing tasks through an iterative knowledge-sharing process. ACQUISITIONS ARE BETTER SUITED FOR THIS SYNERGY.
ACQUISITIONS ARE BETTER OPTIONS WHEN…
THE SYNERGY GENERATING RESOURCES ARE HARD. HARD ASSETS ARE EASY TO VALUE.
EQUITY ALLIANCES IS A BETTER OPTION WHEN…
THE SYNERGY GENERATING RESOURCE ARE PEOPLE.
WHEN COMPANIES HAVE A LARGE AMOUNT OF REDUNDANT RESOURCES……
THEY SHOULD OPT FOR ACQUISITIONS OR MERGERS TO ALLOW EXECUTIVES COMPLETE CONTROL OVER DECISION MAKING.
WHAT IS AN ALLIANCE?
low-cost option opportunities for entering new markets
BENEFITS OF AN ALLIANCE
- access to new technology, markets, and know-how at costs lower than internal development would require,
- leverage of existing resources,
- the development of alliance and structural management capabilities, and
- strategic deterrence, especially in multi-product, multi-market contexts
COSTS OF AN ALLIANCE
- extra managerial time/energy,
- dilution of strategic focus,
leakage of organizational expertise, - loss of capital for internal development,
- over-reliance on alliances, and
badly structured alliances that give up too much for too little.
