Mergers & Acquisitions Case Study - Shandong Flashcards
Define Mergers
Mergers are a corporate strategy of combining two separate entities in to a single firm
Define Acquisitions
Acquisitions are the purchases of all or a % of a corporate asset or target company
Define Corporate Development
Where team members generate strategies that allow the company to enter in to new markets, new partnerships or to engage in mergers and acquisitions
Explain the state of M&A’s for MNEs
MNE’s often face legitimacy concerns when attempting foreign acquisitions.
Instead of focusing on the type and location of the company they seek to acquire, they instead face organisational and parent-subsidary problems
State the Rules and the Risks for mergers and acquisitions
Rules:
- Make sure to buy core underlying technology and rights rather than just the firm licensing the technology
- Communicate with all shareholders
- Dont underestimate the importance of chemistry and culture
Risks:
- Lack of fit with business strategy
- Overpaying
- Lack of cultural fit and poor integration fit
Explain Shandong Gold as a company pre-merger
Was established in 1996 as a large state owned enterprise with significant financial and technical strengths
Since 2017 it has been ranked first amongst chinese gold producing enterprises
In 2016 , Shandong signed a JV with the worlds largest Argentinian gold producer, Barrick. The firm became the 12th largest gold mining firm globally
Explain a background of the gold market Shandong operates in
Gold companies often face high risk in terms of geopolitics, environmental protection and relationships with indigenous groups
To deal with these risks, Shandong developed a special team who studied key mines around the world to make safer plans for future investments
Explain Shandong’s internationalisation strategy
The one road initiative became one of China’s main strategies in 2013
This strategy considered overland transport links between China and Central Asia and Europe as well as maritime routes with Chinese ports
By 2019 the Chinese government signed one belt contracts with 140 countries and 30 international organisations, leading to opportunities for precious metal mining firms
Explain TMAC as a company pre-merger
Are a Canadian gold mining firm with a core asset in Hope Bay, an area of mining rights and growth potential
$1.7 billion was invested by previous owners in to the Hope bay project, however it was more challenging than first thought due to funding - with the stick market downturn due to COVID
Explain the Acquisition of TMAC from Shandong
Shandong learned about the acquisition opportunity from the investment bank contracted by TMAC, meaning a friendly takeover occurred
This investment opportunity was Shandong’s first acquisition outside of China, in a $163 million deal
What does Wang 2022 explain conduit acquisitions to be and how can it be used
Occurs where the acquirer initiates a cross-border acquisition through one of its majority owned subsidiaries already located in the host country.
Can be used as a strategic response to institutional distance
What does Wang 2022 explain Institutional distance to be and what effect does it have on M&As
Is the dissimilarity between host and home country institutions
Can cause difficulty for foreign acquirers to interpret and meet legitimacy acquirements in the host country
Author of the TMAC-Shandong Case study
Liu,2021
