4249132
Description
Mind Map by rachael abercrombie, updated more than 1 year ago
|
Created by rachael abercrombie
over 8 years ago
|
|
Mergers and acquisitions
- M&A is a type of foreign direct investment (FDI):
Strategy in which the firm establishes a physical
presence abroad by acquiring productive assets such as
capital, technology, labor, land, plant, and equipment
- A merger is the combination of two
previously separate organisations,
typically as more or less equal partners
- Mergers and acquisitions (M&A) are of great
practical importance in strategic, monetary,
and social terms (Gomes 2013)
- An acquisition involves one firm taking
over the ownership (‘equity’) of another,
hence the alternative term ‘takeover’
- Europe in 1994 had mergers amounting to
$138 billion (Brouthers 1998)
- In 2014 - 1,338 M&A deals were
done through Europe worth £94b.
M&A in Europe now worth £540 b
- In 2014 - 1,338 M&A deals were
done through Europe worth £94b.
M&A in Europe now worth £540 b
- Europe in 1994 had mergers amounting to
$138 billion (Brouthers 1998)
- An acquisition involves one firm taking
over the ownership (‘equity’) of another,
hence the alternative term ‘takeover’
- Mergers and acquisitions (M&A) are of great
practical importance in strategic, monetary,
and social terms (Gomes 2013)
- A merger is the combination of two
previously separate organisations,
typically as more or less equal partners
- Types of M&A
- Geographical scope
- Domestic – when the target and
the acquire are established in
the same country
- International – when the acquirer and the
target firm have headquarters located in
different home countries
- International – when the acquirer and the
target firm have headquarters located in
different home countries
- Domestic – when the target and
the acquire are established in
the same country
- Mood of deal
- Friendly – when the target and the
acquirer agree the terms together
- Hostile – when the management
team of the target firm disagrees
with the acquisition
- 95% of M&A are friendly (Sapouna 2013)
- 95% of M&A are friendly (Sapouna 2013)
- Hostile – when the management
team of the target firm disagrees
with the acquisition
- Friendly – when the target and the
acquirer agree the terms together
- Functional roles
- Horizontal – M&A is usually between two
companies in the same business sector
- Vertical M&A represents the buying of
supplier of a business
- Conglomerate M&A is the third from
M&A process which deals the merger
between two irrelevant companies
- Conglomerate M&A is the third from
M&A process which deals the merger
between two irrelevant companies
- Vertical M&A represents the buying of
supplier of a business
- Horizontal – M&A is usually between two
companies in the same business sector
- Geographical scope
- M&A Motives
- Merger and acquisition literature suggests
that managers will have various motives for
mergers. (Brouthers 1998)
- Economic/financial motives
- Increased probability
- Financial efficiency
- Tax efficiency
- Risk spreading
- Create shareholder value
- Create shareholder value
- Risk spreading
- Tax efficiency
- Financial efficiency
- Increased probability
- Economic/financial motives
- Personal motives
- Managerial hubris
- Enhance managerial prestige
- Bandwagon effect
- Bandwagon effect
- Enhance managerial prestige
- Managerial hubris
- Strategic moves
- Extension in a new
geographic market
- Developing capabilities
- Pursuit of market power
- Increase bargaining
power against suppliers
- Acquisition of
competitor
- Acquisition of raw materials
- Acquisition of raw materials
- Acquisition of
competitor
- Increase bargaining
power against suppliers
- Pursuit of market power
- Developing capabilities
- Extension in a new
geographic market
- Merger and acquisition literature suggests
that managers will have various motives for
mergers. (Brouthers 1998)
- Mergers and Acquisition Process
- Before Merger and acquisition
- Choice and evaluation of strategic partner Once the need for an M&A is established, the first step
that the acquiring firm must accomplish is to choose a strategic partner in terms of its strengths
and weaknesses (Gomes 2013)
- Pay the right price form of payment. A substantial amount of research from a finance
perspective has indicated that “paying too much” is a major cause of failure (Gomes 2013)
- Size, mismatches and organisation IBM, from 2002 to 2009, it acquired 70 companies for about
$14 billion. By pushing their products through a global sales force, IBM estimates it increased their
revenues by almost 50 percent in the first two years after each acquisition and an average of more
than 10 percent in the next three years.
- Overall strategy and accumulated experience on M and A A considerable amount of research
shows that companies with an overall strategy and experience of M&A are more successful than
those that are less experienced or merely react to a M&A opportunity (Gomes 2013) Tata used
research to look into failed M&A before merging with Jaguar Land Rover in 2008
- Communication before the M & A
- Future compensation policy
- Future compensation policy
- Communication before the M & A
- Overall strategy and accumulated experience on M and A A considerable amount of research
shows that companies with an overall strategy and experience of M&A are more successful than
those that are less experienced or merely react to a M&A opportunity (Gomes 2013) Tata used
research to look into failed M&A before merging with Jaguar Land Rover in 2008
- In 1994, Quaker Oats acquired new company, Snapple, for $1.7 billion. Fresh from their success
with Gatorade, Quaker Oats wanted to make Snapple drinks their next success story. Despite
criticisms from Wall Street that they paid $1 billion too much for the fruity drink company, Quaker
Oats dove head-first into a new marketing campaign and set out to bring Snapple to every grocery
store and chain restaurant they could. However, their efforts failed miserably. Snapple had found
its niche in small, independent stores and gas stations, backed by a quirky and fun advertising
strategy. Quaker didn’t seem to grasp the Snapple identity and after just 27 months, sold Snapple
for $300 million
- Size, mismatches and organisation IBM, from 2002 to 2009, it acquired 70 companies for about
$14 billion. By pushing their products through a global sales force, IBM estimates it increased their
revenues by almost 50 percent in the first two years after each acquisition and an average of more
than 10 percent in the next three years.
- Pay the right price form of payment. A substantial amount of research from a finance
perspective has indicated that “paying too much” is a major cause of failure (Gomes 2013)
- Choice and evaluation of strategic partner Once the need for an M&A is established, the first step
that the acquiring firm must accomplish is to choose a strategic partner in terms of its strengths
and weaknesses (Gomes 2013)
- Post merger and acquisition
- Integration strategies
- Implementation management team The acquisition process is so complex that managers often
spend most of their time concentrating on acquisition issues related to this period of transition,
while day to day business activities may be disregarded (Gomes 2013)
- Speed of implementation
- HR management
- PMI coordination Team and disregard
of day to day business activities
- Communication during implementation Communications play a central part in
the acquisition process (Gomes 2013) In cross border acquisition situation,
communications have to be handled especially carefully since cultural differences
usually add an extra degree of difficulty to the process (Gomes 2013)
- Managing corporate and national cultural differences. In terms of completing
an M&A transaction, the legal and financial aspects are generally well handled,
but managers often fail to consider thoroughly how the new organization will
be operated and managed after the deal (Gomes 2013)
- In 2008, TATA finalised the deal and acquired Jaguar Land Rover culture was respected, trust was
inspired and effective communication took place, all management and personal were left to their
own devices and Tata only intervened when asked. Since the acquisition turnover of JLR has
increased from £5m to nearly £14m in 2012
- In 2008, TATA finalised the deal and acquired Jaguar Land Rover culture was respected, trust was
inspired and effective communication took place, all management and personal were left to their
own devices and Tata only intervened when asked. Since the acquisition turnover of JLR has
increased from £5m to nearly £14m in 2012
- When German Daimler (the makers of Mercedes-Benz) merged with American company Chrysler
in the late 1990s, it was called a “merger of equals.” Both parties went into this deal on friendly
terms as Chrysler wanted access to the European market and Mercedes wanted to offer a range of
more affordable cars. A few years later it was being called a “fiasco.” Due to cultural differences.
Differences between the companies included their level of formality, philosophy on issues such as
pay and expenses, and operating styles. In 2007, Daimler sold Chrysler to Cerberus Capital
Management for $6 billion.
- Managing corporate and national cultural differences. In terms of completing
an M&A transaction, the legal and financial aspects are generally well handled,
but managers often fail to consider thoroughly how the new organization will
be operated and managed after the deal (Gomes 2013)
- Communication during implementation Communications play a central part in
the acquisition process (Gomes 2013) In cross border acquisition situation,
communications have to be handled especially carefully since cultural differences
usually add an extra degree of difficulty to the process (Gomes 2013)
- PMI coordination Team and disregard
of day to day business activities
- HR management
- Speed of implementation
- Implementation management team The acquisition process is so complex that managers often
spend most of their time concentrating on acquisition issues related to this period of transition,
while day to day business activities may be disregarded (Gomes 2013)
- Integration strategies
- Before Merger and acquisition
Want to create your own Mind Maps for free with GoConqr? Learn more.