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Strategic Management > Type of Investment > Flashcards

Type of Investment Flashcards

1
Q

What are Wholly-owned subsidiaries?

A

Firm that owns 100% of stock

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2
Q

What is a Greenfield operation?

A

Establishment of a new operation in a foreign country “from scratch”

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3
Q

What is Acquisition?

A

Buying control of a corporation

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4
Q

What is M&A?

A

Merger and Acquisition

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5
Q

What is involved in the Pre-Deal/Planning during the process of M&A?

A 
􏰀 Basic Strategy
􏰀 Screening
􏰀 Exploratory Talks 
􏰀 Structure
􏰀 Simulation 
􏰀 Evaluation 
􏰀 Feasibility 
􏰀 Contact
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6
Q

What is involved in the Transaction phase of the process of M&A?

A 
􏰀 Due Diligences
􏰀 Pre-Closing- Integration-Plan
􏰀 Evaluation
􏰀 Internal Decisions 􏰀 Negotiations
􏰀 Anti-Trust
􏰀 Closing
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7
Q

What is involved in the Post-Deal/Integration phase of the process of M&A?

A 
􏰀 Post-Closing- Integration-Plan
􏰀 Organizational / Legal Integration
􏰀 Human Resources Integration
􏰀 Cultural Objectives
􏰀 Reaching of Objectives
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8
Q

What is a key factor of International competition law?

A

There is No international private law for cross-national acquisitions

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9
Q

What are the two main principles for Domestic anti-trust legislation?

A

Effects Doctrine

Comity Principle

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10
Q

What is the Effects doctrine for Domestic anti-trust legislation?

A

Countries need to be able to effectively protect competition under their jurisdiction

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11
Q

What is the Comity Principle for Domestic anti-trust legislation?

A

􏰀 Negative comity: consideration of the effects of any action on the other party
􏰀 Positive comity: entitles one authority to refer a case to another authority

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12
Q

What have been some WTO actions regarding antitrust?

A

-Set up the working group for trade and competition policy to identify any areas that need improvement
-Instructions for working group to clarify core principles, provisions on hardcore cartels, and modalities for voluntary cooperation
-No consensus could be reached on modalities for negotiations in the field of
international antitrust law
-WTO General Council decided that the issue of international antitrust policy “will not form part of the Work Program set out in that declaration and therefore no work towards negotiations on any of these issues will take place within the WTO during the Doha Round”

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13
Q

What is Horizontal Acquisition?

A

Acquired company works on same value chain level

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14
Q

What is Vertical Acquisition?

A

Target firm operates up- or down-stream in the value chain

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15
Q

What is Concentric Acquisition?

A

Acquired company is in same industry

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16
Q

What is Conglomerate Acquisition?

A

Different industry

17
Q

What is Friendly Acquisition?

A

Acquired company agrees with acquisition

18
Q

What is Hostile Acquisition?

A

(Vodafone’s acquisition of Mannesmann)

19
Q

What is Builder acquisition?

A

Acquired company is integrated in acquiring company

20
Q

What is Raider Acquisition?

A

Acquired company is decomposed, valuable parts are sold

21
Q

What is Cash Payment Acquisition?

A

Acquiring company pays owner cash

22
Q

What is Exchange of stock Acquisition?

A

Stock owner receives stocks of acquiring company or new company

23
Q

What are Structural Barriers to cross-border acquisitions?

A

􏰀 Statutory (strong power of supervisory boards, unions councils)
􏰀 Regulatory (antitrust regulation)
􏰀 Infrastructure (absence of legal or investment banking services)

24
Q

What are Technical (management) barriers to cross-border acquisitions?

A

􏰀 Families dominate shareholding

􏰀 Powers to limit maximum voting rights

25
Q

What are Information barriers to cross-border acquisitions?

A

􏰀 Accounting (low compliance with international standards)
􏰀 Shareholders (shareholding structure not known)
􏰀 Regulation (procedures not known)

26
Q

What are Culture and Traditions barriers to cross-border acquisitions?

A

􏰀 Value system (premium on confidence rather than formal contracts)
􏰀 Attitude (unwillingness to disclose information)

27
Q

What is Due Diligence in Acquisitions?

A

all activities of acquiring, verifying, analyzing, and documenting information about potential acquisitions prior to signing a contract

28
Q

Where does Due Diligence originate from?

A

American securities law, required diligence for transactions to verify the quality of the assets

29
Q

What is due diligence in strategic management?

A

􏰀 Instrument for strategic planning
􏰀 Investigating historical development, current organization, the management and important company data of the potential acquisition
􏰀 Learning about market, company’s strategy and employees

30
Q

What are the goals of Due Diligence?

A

􏰀 Discovering chances and risks for present and future
􏰀 Definition and quantification of synergies and the “strategic fit“
􏰀 Evaluation and pricing of the company
􏰀 Encounter and evaluation of the management
􏰀 Preparations for a fast integration of the acquired company
􏰀 Improving acquisition success and hit ratio

31
Q

What are the advantages of Acquisition over Greenfield?

A

Table, pg 89

  • speed of establishment
  • access to local partners
  • competitive markets
32
Q

What are the advantages of Greenfield over Acquisition?

A

Table, pg 89

  • Integration of subsidiary
  • avoidance of governmental/legal interactions
33
Q

What fosters success of FDI?

A

Economic distance between home and host country

34
Q

What do less experienced countries need to survive investments?

A

Diagram, pg 91
􏰀 Exploitation of firm resources
􏰀 Greenfield investments more useful

35
Q

What do more experienced countries need to survive investments?

A

Diagram, pg 91
􏰀 Exploration of new technological capabilities
􏰀 Acquisitions more useful

36
Q

What are the five type of Acquisition?

A 
􏰀 Horizontal vs. vertical
􏰀 Concentric vs. conglomerate
􏰀 Friendly vs. hostile
􏰀 Builder vs. raider
􏰀 Cash payment vs. exchange of stock
37
Q

What are 4 barriers to cross-border acquisitions?

A

􏰀 Structural barriers
􏰀 Technical (management) barriers
􏰀 Information barriers
􏰀 Culture and tradition

Strategic Management (11 decks)

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