Mergers And Acquisitions

• What is the fastest route for growth in business?

  External growth through mergers or takeovers
• What are common reasons for mergers and acquisitions?

  • Acquire ideas or innovations
  • Speed access to new markets
  • Achieve synergy
  • Share market knowledge
  • Increase market share
  • Access economies of scale
  • Secure better distribution channels
  • Acquire intangible assets
  • Acquire tangible assets
  • Overcome market entry barriers
  • Eliminate competition
  • Diversify risks
  • Take advantage of deregulation
• How is a takeover different from a merger?

  A takeover is more hostile than a merger
• What is horizontal integration?

  • Merging businesses in the same industry
  • At the same stage of production
  • Examples include Nike and Umbro, Morrisons and Safeway
• What is vertical integration?

  • Acquiring businesses at different supply chain stages
  • Examples include film distributors owning cinemas
  • Brewers owning pubs
• What is a conglomerate merger?

  Firms from different industries merge
• Why do many mergers and acquisitions fail to improve shareholder value?

  • High financial costs
  • Clashes of corporate cultures
  • Loss of key personnel
  • The winner's curse
  • Integration leads to job losses
  • Bad timing of mergers
• What are the advantages of vertical integration?

  Lower prices and complete control
• What are the disadvantages of vertical integration?

  Hindered flexibility and high capital requirements
• What are the advantages of horizontal integration?

  • Similar production processes
  • Increased market share
  • Enhanced market knowledge
• What are the disadvantages of horizontal integration?

  • Cultural clashes
  • Attention from competition authorities
  • Diseconomies of scale
• What are the advantages of conglomerate integration?

  • Diversification and risk spreading
  • Investment opportunities
  • Cross-selling to new customers
• What are the disadvantages of conglomerate integration?

  • Lack of experience in new industries
  • Shift in focus from core business
  • Cultural and skillset integration challenges
• What are the reasons for demergers?

  • Globalization and competition disadvantages
  • Diseconomies of scale
  • Specialization benefits
  • Historical merger size issues
• What are reasons firms remain small?

  • Niche markets and small market size
  • Lack of finance and retained profits
  • Different objectives and risk avoidance
  • Need for personalized service
  • Tax breaks and government incentives
  • Avoiding competition authority attention
• What was the case of eBay and PayPal in 2015?

  They demerged to focus on their markets
• What is the impact of technological advancements on conglomerates?

  They reduce cost advantages of conglomerates
• What is the significance of the Project Merlin agreement?

  It encouraged lending to small businesses