Session 1c reasons to do M&A Flashcards
What were the reasons Ferrero acquired confectionary business from Nestle?
- Increase market share
- Expand portfolio product
- Geographical expansion
What were the reasons Google acquired Youtube?
- Defensive acquisition
- Acquire a new technology
What was the reason Fiat acquired Chrysler?
- Buy underperforming companies.
Why did PepsiCo merge with Quaker?
- Market power
- Synergies
- Expand product portfolio (Gatorade)
Why did Google acquire Motorola Mobilitiy?
- Tax consideration
Why did Elon Musk acquire Twitter?
- Ego
Why did Amazon buy Whole Foods?
- Diversification
What are the possible reasons to do M&A?
- Strategic realignment
- Reaping synergies
- Financial consideration
- Tax consideration
- Ego/Hubris
- Diversification
What are the cases where diversification might pay?
- There is high relatedness in terms of industry focus between the target and the buye
- Promotes knowledge transfer across divisions
- Creates critical mass for facing the competition
- Exploits better transparency and monitoring through internal capital markets
- Managers are properly motivated and rewarded
What are the costs of extreme diversification?
- Information-processing constraints: difficulties in monitoring the simultaneous performance of businesses
- Internal politics: conflicts between various business units
- Incentive problem: increasing difficulties of setting remuneration schemes
- Lack of responsiveness: difficult time to the market of the controlled businesses due to the slower decisional process
What are the 2 factors that determine the outcome of an M&A deal?
- Conduct pursued by actors involved
- Structure of M&A deal
What determines the outcome of an M&A deal in terms of structure?
- Economics of the opportunity
- Strategy (SWOT analysis)
- Culture and Organization of the new Entity
- Brand & Intangibles
- Law (Risk & Opportunities)
- Ethics
What determines the outcome of an M&A deal in terms of conduct pursued by actors involved?
- Search for Partners
- Due Diligence
- Negotiation
- Law and Regulation Management
- Deal Design
- Post Merger Integration
What are the three pillars of M&A success based on conduct pursued by actors invovled.
- Direction - “Choose the right battlefield”
- Fit - “Find your best buddy”
- Cooperation - “It’s not about making the right deal: it’s about making the deal right”
How can we measure the success of an M&A based on outcomes?
- Creation of Market Value
- Financial Stability
- Strategic and Competitive Advantages
- Organizational Benefits
- Enhanced Brand and Intangibles
