Week 5 - Mergers and Acquisitions Flashcards

1
Q

What is a merger?

A

the combination of two previously seperate organisations, typically as more or less equal partners

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2
Q

What is an acquisition?

A

Involves one firm taking over the ownership (equity) of another

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3
Q

What two main criteria apply when choosing a target in M&A?

A

Strategic fit and organisational fit

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4
Q

What question does strategic fit ask?

A

Does the target firm strengthen or complement the acquiring firms strategy?

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5
Q

What question does organisational fit ask?

A

Is there a match between the management practices, cultural practices, and staff characteristics of the target and acquiring firms?

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6
Q

How to calculate the value of a premium?

A

(Price offered- pre merger target price) / pre merger target price

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7
Q

What happens if too little is offered?

A

The bid will be unsuccessful

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8
Q

What happens if an organisation pays too much for the acquisition?

A

the acquisition is unlikely to make a profit net of the original acquisition price

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9
Q

Explain how a company may increase its chances of success in an M&A?

A

By focusing on what they have to give as opposed to what they can get

By being a smart provider of capital

By providing better managerial oversight

By transferring valuable skills

By sharing valuable capabilities

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10
Q

What does Warren Buffet demand when Berkshire Hathaway is involved in an M&A?

A

Must be a large business except if it will fit into an existing business

Consistent earning power, no care for future projections

Good returns on equity with little or no debt

Management team in place

A simple business, understandable

An offering price

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11
Q

How does Marks et al (2017) suggest that employees respond to an M&A?

A

Assess the situation, sieze growth opportunities, and find your opening

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12
Q

Explain how an employee may assess the situation in light of an M&A

A

If an M&A actually affects an employee, they should conduct a personal SWOT

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13
Q

Explain what characteristics of a personal SWOT may be relevant in an M&A situation

A

Strengths: soft skills, networking capabilities, and the value of that network

Weaknesses: inability to deal with uncertainty, difficulty networking, an incompetent management team that doesnt provide support

Opportunities: potential landing spots in new entity, level of interest in these positions, whether there is a path to advancement

Threats: where staff reductions are most likely, whether you are currently working a duplicative function, or whether your line of business is more dominant in the other company

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14
Q

Explain how an employee may seize a growth opportunity in light of an M&A

A

By inserting themselves into the integration process in a way that highlights core strengths and allows for development

By participating in the common transition structure to build colloaboration and innovation skills

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15
Q

What is a transition structure?

A

A temporary but formal organisation companies set up in light of an M&A

It is made up of committees, task forces, and teams charged with realising the expected merger synergies

Employees should seek to integrate themselves into these organisations to give themselves the best chance of continued growth

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16
Q

Explain how an employee may find their opening in light of an M&A

A

If you have a good relationship with your superior, may be good to talk to them

Otherwise seek out a trusted colleague close to headquarters