Acquisition and Restructuring Strategies,Michael A. Hitt R. Duane Ireland Robert E. Hoskisson,Chapter 7,1,2003 Southwestern Publishing Company,Strategy Implementation,Chapter 11 Organizational Structure and Controls,Chapter 10 Corporate Governance,Chapter 12 Strategic Leadership,Strategy Formulation,Strategic Competitiveness Above-Average Returns,Strategic Intent Strategic Mission,Chapter 2 The External Environment,Chapter 3 The Internal Environment,The Strategic Management Process,Feedback,Strategic Inputs,Strategic Actions,Strategic Outcomes,Chapter 13 Strategic Entrepreneurship,Chapter 6 Corporate- Level Strategy,Chapter 5 Competitive Rivalry and Competitive Dynamics,Chapter 4 Business-Level Strategy,Chapter 7 Acquisition and Restructuring Strategies,2,Mergers and Acquisitions,Merger: a strategy through which two firms agree to integrate their operations on a relatively co-equal basis Acquisition: a strategy through which one firm buys a controlling interest in another firm with the intent of making the acquired firm a subsidiary business within its own portfolio Takeover: a special type of an acquisition strategy wherein the target firm did not solicit the acquiring firms bid,3,Reasons for Making Acquisitions,4,Reasons for Making Acquisitions:,Factors increasing market power when a firm is able to sell its goods or services above competitive levels or when the costs of its primary or support activities are below those of its competitors usually is derived from the size of the firm and its resources and capabilities to compete Market power is increased by horizontal acquisitions vertical acquisitions related acquisitions,Increased Market Power,5,Reasons for Making Acquisitions:,Barriers to entry include economies of scale in established competitors differentiated products by competitors enduring relationships with customers that create product loyalties with competitors acquisition of an established company may be more effective than entering the market as a competitor offering an unfamiliar good or service that is unfamiliar to current buyers provides a new entrant with immediate market access,Overcome Barriers to Entry,6,Reasons for Making Acquisitions:,Significant investments of a firms resources are required to Develop new products internally introduce new products into the marketplace Acquisition of a competitor may result in more predictable returns faster market entry rapid access to new capabilities,Cost of New Product Development and Speed to Market,7,Reasons for Making Acquisitions:,An acquisitions outcomes can be estimated more easily and accurately compared to the outcomes of an internal product development process Therefore managers may view acquisitions as lowering risk,Lower Risk Compared to Developing New Products,8,Reasons for Making Acquisitions:,It may be easier to develop and introduce new products in markets currently served by the firm It may be difficult to develop new products for markets in which a firm lacks experience it is uncommon for a firm to develop new products internally to diversify its product lines acquisitions are the quickest and easiest way to diversify a firm and change its portfolio of business,Increased Diversification,9,Reasons for Making Acquisitions:,Firms may use acquisitions to reduce their dependence on one or more products or markets Reducing a companys dependence on specific markets alters the firms competitive scope,Reshaping the Firms Competitive Scope,10,Reasons for Making Acquisitions:,Acquisitions may gain capabilities that the firm does not possess Acquisitions may be used to acquire a special technological capability broaden a firms knowledge base reduce inertia,Learning and Developing New Capabilities,11,Problems With Acquisitions,12,Problems With Acquisitions,Integration challenges include melding two disparate corporate cultures linking different financial and control systems building effective working relationships (particularly when management styles differ) resolving problems regarding the status of the newly acquired firms executives loss of key personnel weakens the acquired firms capabilities and reduces its value,Integration Difficulties,13,Problems With Acquisitions,Evaluation requires that hundreds of issues be closely examined, including financing for the intended transaction differences in cultures between the acquiring and target firm tax consequences of the transaction actions that would be necessary to successfully meld the two 地位正勤勉 Ineffective due-diligence process may result in paying excessive premium for the target company,Inadequate Evaluation of Target,14,Problems With Acquisitions,Firm may take on significant debt to acquire a company High debt can increase the likelihood of bankruptcy lead to a downgrade in the firms credit rating preclude needed investment in activities that contribute to the firms long-term success,Large or Extraordinary Debt,15,Problems With Acquisitions,Synergy exists when assets are wo