Sudarsaman 1-7 Flashcards
How do PEST factors affect merger activities?
political, economic, social, and technical activities are dimensions to explain merger activities and suggest that different industries may be affected differently by forces generating disturbances.
Five-Stage M&A Process
What are the five stages of the M&A process
Chapter 1 of *Creating Value from Mergers and Acquisitions
The five stages are corporate strategy development, organizing for acquisitions, deal structuring and negotiation, post-acquisition integration, and post-acquisition audit and organizational learning.
Merger Waves
What is a merger wave, and why does it occur?
Chapter 1 of *Creating Value from Mergers and Acquisitions
A merger wave refers to periods of intense merger and acquisition activity followed by relative inactivity. These waves are triggered by economic, technological, and market changes
Economic and Behavioral Models of Merger Waves
What are the two main types of models explaining merger waves?
**C1
The economic model explains mergers as a response to changes in technology or market conditions. The behavioral model attributes mergers to managerial motivations, such as hubris or overconfidence.
Conglomerate Diversification and Value Creation
Why does conglomerate diversification often fail to create value?
**C1
Conglomerate diversification can destroy shareholder value due to overestimating market opportunities and underestimating risks like technological evolution.
Agency Theory in M&A
How does agency theory apply to mergers and acquisitions?
**C1
Agency theory suggests that managers may pursue mergers for personal gain rather than shareholder value, especially in cases where ownership is separated from control.
Market Power and Mergers
How can mergers affect market power?
**C1
Mergers can increase market power, leading to potential anti-competitive practices like price hikes, reduced output, and lower consumer welfare, especially in horizontal mergers.
Antitrust Regulation
What is the primary goal of antitrust regulation in mergers?
**C1
The goal of antitrust regulation is to prevent mergers that harm competition and consumer welfare by increasing market power.
Post-Acquisition Integration
Why is post-acquisition integration critical in M&A success?
**C1
Post-acquisition integration determines how well the acquiring and acquired companies can combine resources, systems, and cultures to achieve the strategic goals of the merger.
Organizational Learning in M&A
How does organizational learning impact future acquisitions?
**C1
Effective organizational learning from past acquisitions can improve performance in future deals by codifying lessons and refining acquisition strategies.
Horizontal vs. Vertical Mergers
What is the difference between horizontal and vertical mergers?
**C1
Horizontal mergers occur between companies in the same industry, often leading to increased market power. Vertical mergers occur between firms in different stages of the value chain, potentially improving efficiency but also risking foreclosure of competitors.
Merger Waves
What triggers merger waves, and how are they identified?
**C2
Merger waves are triggered by economic and technological changes, leading to periods of intense M&A activity. They are identified through patterns of bursts of mergers followed by inactivity
Industry Clustering in Mergers
Why do mergers often occur in industry clusters?
**C2
Industry clustering happens when mergers are concentrated within specific sectors due to technological innovations, regulatory changes, or competitive pressures.
Rational Economic Models of Merger Waves
What do rational economic models suggest about merger waves?
**C2
Rational economic models suggest that mergers occur due to economic disturbances, where firms acquire others to reallocate assets to more efficient uses during periods of economic growth.
Behavioral Models of Merger Waves
What do behavioral models explain about merger waves?
**C2
Behavioral models attribute merger waves to managerial opportunism, where overconfident managers exploit stock market overvaluation to pursue acquisitions.
Q Theory of Merger Waves
What does the Q Theory of mergers propose?
**C2
The Q Theory posits that mergers are driven by valuation differences, where high-Q firms acquire low-Q firms to redeploy assets more efficiently, fueling merger waves.
Impact of Economic Growth on M&A
How does being a first-mover in a merger wave impact firms?
**C2
First-movers can gain competitive advantages through early consolidation, but following firms may also benefit by learning from their mistakes.
First Mover Advantage in Industry Clusters
How does being a first-mover in a merger wave impact firms?
**C2
First-movers can gain competitive advantages through early consolidation, but following firms may also benefit by learning from their mistakes.
Globalization of Merger Waves
How has globalization affected merger waves?
**C2
Merger waves are no longer confined to the US and Europe. Emerging markets like BRIC countries have seen increased M&A activity in recent years.
PEST Analysis and Merger Waves
How do PEST factors influence merger waves?
**C2
Political, Economic, Social, and Technological (PEST) factors create the external environment that can trigger merger waves by altering competitive dynamics in industries .
Divestiture Activity during Merger Waves
Why does divestiture activity often increase during merger waves?
**C2
High levels of divestitures during merger waves indicate that many acquisitions do not create long-term value, leading companies to sell off parts of their businesses.
Economic Perspective on M&A
What is the economic perspective on mergers and acquisitions?
**C3
The economic perspective views mergers as a response to external factors like market structure and competition, focusing on monopoly power, economies of scale, and vertical integration
Strategic Perspective on M&A
What does the strategic perspective emphasize in M&A?
**C3
The strategic perspective highlights mergers as a means to achieve competitive advantage through resource acquisition, exploiting synergies, and enhancing market position
Finance Theory Perspective on M&A
What is the focus of the finance theory perspective in M&A?
**C3
The finance theory perspective focuses on internal firm issues, such as conflicts of interest between shareholders, managers, and creditors, emphasizing shareholder wealth maximization
Managerial Perspective on M&A
How does the managerial perspective view mergers and acquisitions?
**C3
The managerial perspective examines the motives and decision-making processes of managers, suggesting that managers may pursue M&A to enhance their own utility rather than shareholder value
Organizational Perspective on M&A
What is the role of agency theory in M&A?
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**C3
Agency theory explains that managers, acting as agents for shareholders.
Agency Theory and M&A
What is the role of agency theory in M&A?
**C3
Agency theory explains that managers, acting as agents for shareholders, may engage in M&A for personal benefit, creating agency costs that may reduce shareholder value