1、Chapter 7Acquisition and Restructuring StrategiesMergers and AcquisitionsMergerA transaction where two firms agree to integrate their operations on a relatively coequal basis because they have resources and capabilities that together may create a stronger competitive advantageAcquisitionA transactio

2、n where one firm buys another firm with the intent of more effectively using a core competence by making the acquired firm a subsidiaryTakeoverAn acquisition where the target firm did not solicit (懇求) the bid of the acquiring firmProblems inAchieving SuccessIntegrationdifficultiesInadequate evaluati

3、on of targetToo muchdiversificationLarge orextraordinary debtInability toachieve synergyManagers overlyfocused on acquisitionsToo largeIncreasedmarket powerOvercomeentry barriersLower riskcompared to developing new productsCost of newproduct developmentIncreased speedto marketIncreaseddiversificatio

4、nAvoid excessivecompetitionAcquisitionsReasons forAcquisitions Reasons for AcquisitionsExample: Belgian-Dutch Fortis acquisition of American Bankers Insurance GroupExample: Sohu acquired ChinaRenExample: British Petroleums acquisition of U.S. AmocoIncreased Market PowerAcquisition intended to reduce

5、 the competitive balance of the industryOvercome Barriers to EntryAcquisitions overcome costly barriers to entry which may make “start-ups economically unattractiveBuying established businesses reduces risk of start-up venturesLower Cost and Risk of New Product DevelopmentExample: Nortels acquisitio

6、n of Bay NetworksExample: Kraft Foods acquisition of Boca BurgerExample: JiaoDas acquisition of CaiyuanReasons for AcquisitionsIncreased Speed to MarketClosely related to Barriers to Entry, allows market entry in a more timely fashionDiversificationQuick way to move into businesses when firm current

7、ly lacks experience and depth in industryReshaping Competitive ScopeFirms may use acquisitions to restrict its dependence on a single or a few products or marketsProblems with AcquisitionsExample: Marks and Spencers acquisition of Brooks BrothersExample: Intels acquisition of DECs semiconductor divi

8、sionExample: AgriBioTechs acquisition of dozens of small seed firmsIntegration DifficultiesDiffering financial and control systems can make integration of firms difficultInadequate Evaluation of Target“Winners Curse bid causes acquirer to overpay for firmLarge or Extraordinary DebtCostly debt can cr

9、eate onerous burden on cash outflowsExample: Ford and JaguarExample: JiaoDa and CaiyuanExample: GE-prior to selling businesses and refocusingInability to Achieve SynergyJustifying acquisitions can increase estimate of expected benefitsProblems with AcquisitionsOverly DiversifiedAcquirer doesnt have

10、expertise required to manage unrelated businessesManagers Overly Focused on AcquisitionsManagers may fail to objectively assess the value of outcomes achieved through the firms acquisition strategyToo LargeLarge bureaucracy (官僚) reduces innovation and flexibilityAttributes of Effective AcquisitionsC

11、omplementary Assets or ResourcesBuying firms with assets that meet current needs to build competitiveness+Friendly AcquisitionsFriendly deals make integration go more smoothly+Careful Selection ProcessDeliberate evaluation and negotiations is more likely to lead to easy integration and building syne

12、rgies+Maintain Financial Slack (充足的資金)Provide enough additional financial resources so that profitable projects would not be foregone+Attributes of Effective AcquisitionsLow-to-Moderate DebtMerged firm maintains financial flexibility+FlexibilityHas experience at managing change and is flexible and a

13、daptable+Emphasize Innovation Continue to invest in R&D as part of the firms overall strategy+Example: Procter & Gambles cutting of its worldwide workforce by 15,000 jobsRestructuring ActivitiesExample: Disneys selling of Fairchild PublicationsDownsizingWholesale reduction of employeesDownscopingRed

14、ucing scope of operationsSelectively divesting or closing non-core businessesLeads to greater focusLeveraged Buyout (LBO)-A party buys a firms entire assets in order to take the firm private. -occurs when a corporations shareholders are bought by the companys management and other private investors u

15、sing borrowed funds (leverage / interests)-hostile takeover can be avoided-senior management decisions that particular divisions do not fit into an overall corporate strategy or must be sold to raise cash, or receipt of an attractive offering price. Restructuring ActivitiesDownsizingDownscopingLever

16、agedBuyoutAlternativesShort-Term OutcomesLong-Term OutcomesRestructuring and OutcomesLoss of Human CapitalLower PerformanceDownsizingReduced Labor CostsAlternativesShort-Term OutcomesLong-Term OutcomesRestructuring and OutcomesHigher PerformanceReduced Debt CostsEmphasis on Strategic ControlsDownscopingDownsizingReduced Labor CostsLoss of Human CapitalLower PerformanceAlternativesShort-Term OutcomesLong-Term OutcomesRestructuring and Outcomes