Mergers and Acquisitions

Question 1

What is a merger?

Answer 1

-when 2 businesses join together to create business with greater resources and capabilities
-more competitive than if own their own
-in theory should form equal partners , but rarely the case

Question 2

What is an aquisition?

Answer 2

-one company buys another one- then becomes subsidiary of purchasing company

Question 3

What are the reasons for an aquisition?

Answer 3

-acquire capabilities (skills, resources, market share, prime vy locations) that the purchasing company believes it lacks
=creating more competitive business
-also, failing companies taken over to save them going out of business

Question 4

Why do some larger companies acquire businesses? Give an example

Answer 4

-reduce costs and keep down prices through economies of scale and simplification of the supply chain
-eg E&J Gallo- purchased number of producers
-Jackson Family Wines= growing their business so can compete in more sectors

Question 5

Despite loss of control of their business, what are some of the advantages to smaller business being acquired?

Answer 5

-increased investment
-large distribution networks= new routes to market

Question 6

Give an example of distributers who have consolidated

Answer 6

-Conviviality with Matthew Clark/Bibendum
-however didn’t work

Question 7

Give an example of a company not in the wine industry that has been consolidated

Answer 7

-USA private equity firm- Carlyle Group purchased Accolade Wines- 2018
-When trade war between USA and China- tariffs paced on USA wines entering China, whereas Australian wines (large part of Accolade portfolio) benefitted free trade agreement.