🎈
m&a
🦑 textbook readings
revision lecture
weekly quiz answers
lecture 1: intro
corporate restructuring is an important instrument of macroeconomic renewal.
can be viewed through lenses of:
strategic
legal
taxation
cultural
psychological
practical
essentially m&a is a controversial topic:
m&a 1
, in favour opposed
critical to healthy expansion of no improvements subsequent to the
business firms acquisition
increase value and efficiency redistribution of wealth from
employees and other stakeholders
move resources to optimal uses
and shareholders
speculative activity
important terminology
merger
negotiated deals
mutuality of negotiations
mostly friendly
tender offer
offer made directly to the firms shareholders, to buy their shared for a given
price
hostile when offer made without approval of board
acquisition
all of the above, basically any deal
corporate restructuring
changes to improve firms’ operations, policies and strategies
types of mergers
horizontal
between firms in the same business activity
m&a 2
, rationale
economies of scale and scope
synergies
government regulation due to potential anticompetitive effects
vertical mergers
combinations between firms at different stages
rationale
improve information
lower transaction costs
reduce lock-up problems
but can create loss in economic discipline
As markets became more sophisticated and globalised, traditional
justifications for vertical mergers fell away.
However, a growing number of companies, especially in IT, are reverting to
more vertically integrated structures.
Reasons for the rebound of vertical integration include:
Simplicity: customers want well-integrated products (eg Apple)
Efficiency: reducing transaction costs (eg Tesla)
Build a relationship with customers (eg Amazon and Netflix)
Need for speed (eg Zara)
Geopolitical uncertainty and the environment (eg Ferrero, Ikea, Disney)
(Source: The Economist, April 16, 2016)
conglomerate mergers
firms in unrelated business activities
rationale
m&a 3
, diversification
“good managers can manage anything”
nature of strategy
defines the long-term plans, policies and culture of an organisation
strategic planning is a dynamic process that requires inputs from all segments of
the organisation
acquisition and restructuring policies and decisions should be part of the
company’s overall strategic plans and processes
ultimate responsibility for strategic planning resides in the top executive group
classical successful strategies
low-cost leadership
create a sustainable cost advantage over competitors
differentiation
distinguish the firm through innovation, product quality…
focus or specialisation
find and dominate a market niche
three key steps:
A mission or vision statement describing the main objectives of the
organisation that is translated into,
A set of strategic objectives.
A firm’s strategy is a plan for fulfilling the mission and achieving the
strategic objectives.
A set of tactics are specific actions to implement the strategy, for example:
expand the firm through organic or inorganic growth
divest segments of the firm
m&a 4
m&a
🦑 textbook readings
revision lecture
weekly quiz answers
lecture 1: intro
corporate restructuring is an important instrument of macroeconomic renewal.
can be viewed through lenses of:
strategic
legal
taxation
cultural
psychological
practical
essentially m&a is a controversial topic:
m&a 1
, in favour opposed
critical to healthy expansion of no improvements subsequent to the
business firms acquisition
increase value and efficiency redistribution of wealth from
employees and other stakeholders
move resources to optimal uses
and shareholders
speculative activity
important terminology
merger
negotiated deals
mutuality of negotiations
mostly friendly
tender offer
offer made directly to the firms shareholders, to buy their shared for a given
price
hostile when offer made without approval of board
acquisition
all of the above, basically any deal
corporate restructuring
changes to improve firms’ operations, policies and strategies
types of mergers
horizontal
between firms in the same business activity
m&a 2
, rationale
economies of scale and scope
synergies
government regulation due to potential anticompetitive effects
vertical mergers
combinations between firms at different stages
rationale
improve information
lower transaction costs
reduce lock-up problems
but can create loss in economic discipline
As markets became more sophisticated and globalised, traditional
justifications for vertical mergers fell away.
However, a growing number of companies, especially in IT, are reverting to
more vertically integrated structures.
Reasons for the rebound of vertical integration include:
Simplicity: customers want well-integrated products (eg Apple)
Efficiency: reducing transaction costs (eg Tesla)
Build a relationship with customers (eg Amazon and Netflix)
Need for speed (eg Zara)
Geopolitical uncertainty and the environment (eg Ferrero, Ikea, Disney)
(Source: The Economist, April 16, 2016)
conglomerate mergers
firms in unrelated business activities
rationale
m&a 3
, diversification
“good managers can manage anything”
nature of strategy
defines the long-term plans, policies and culture of an organisation
strategic planning is a dynamic process that requires inputs from all segments of
the organisation
acquisition and restructuring policies and decisions should be part of the
company’s overall strategic plans and processes
ultimate responsibility for strategic planning resides in the top executive group
classical successful strategies
low-cost leadership
create a sustainable cost advantage over competitors
differentiation
distinguish the firm through innovation, product quality…
focus or specialisation
find and dominate a market niche
three key steps:
A mission or vision statement describing the main objectives of the
organisation that is translated into,
A set of strategic objectives.
A firm’s strategy is a plan for fulfilling the mission and achieving the
strategic objectives.
A set of tactics are specific actions to implement the strategy, for example:
expand the firm through organic or inorganic growth
divest segments of the firm
m&a 4
