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Mission
Objectives
Strategy Implementation
Competitive Advantage
Internal Analysis
Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall. Strategic Management & Competitive
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2) such that businesses forming the corporate whole are worth more than they would be under independent ownership
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Acquisitions
one firm buys another firm
the words are often used interchangeably even though they mean something very different
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Acquisitions
can be a controlling share, a majority, or all of the target firms stock can be friendly or hostile usually done through a tender offer
Advantage Barney & Hesterly
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Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall. Strategic Management & Competitive
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Acquiring Firms
no value created
Target Firms
related M&A activity creates more value than unrelated M&A activity
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Operational
Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall. Strategic Management & Competitive
Survival
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Managerial Hubris
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proposed M&A activity may satisfy the logic of corporate level strategy
managers may see economies that the market cant see
Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall. Strategic Management & Competitive
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Competitive Advantage
Can an M&A strategy generate sustained competitive advantage? Yes, if managers abilities meet VRIO criteria
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Managers may be good at recognizing & exploiting potentially value-creating economies with other firms Managers may be good at doing deals Managers may be good at both
Advantage Barney & Hesterly
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Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall. Strategic Management & Competitive
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Competitive Advantage
Recognizing and Exploiting Economies of Scope
Private Economies Firm A Firm C Firm B Bidders Target Firm Cs recognized value is $10,000 Firm A sees value of $12,000 in Firm C Firm A can earn a profit of $2,000 only if the economy remains private
Advantage Barney & Hesterly
Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall. Strategic Management & Competitive
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Competitive Advantage
Recognizing and Exploiting Economies of Scope
Costly-to-Imitate Economies Firm A if the economy between A & C is costly to imitate, it doesnt matter if other firms know Firm A can still earn a $2,000 profit
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Firm C
Firm B Bidders Target
Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall. Strategic Management & Competitive
Competitive Advantage
Recognizing and Exploiting Economies of Scope
Unexpected Economies Firm A Firm C Firm B Bidders Target
Advantage Barney & Hesterly
Firm C has a market value of $10,000 Firm A buys Firm C for $10,000 Firm C turns out to be worth $12,000
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Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall. Strategic Management & Competitive
Competitive Advantage
Doing the Deal
Search for Rare Economies
Seek Thinly Traded Markets Bidding Firms Perspective Limit Information to Other Bidders
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Competitive Advantage
Doing the Deal
Seek Information from Bidders
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Implementation Issues
Structure, Control, and Compensation
M&A activity requires responses to these issues: m-form structure is typically used
management controls & compensation policies are similar to those used in diversification strategies Managers must decide on the level of integration: target firm may remain somewhat autonomous
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Implementation Issues
Cultural Differences
high levels of integration require greater cultural blending cultural blending may be a matter of:
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Summary
M&A activity is a mode of entry for vertical integration and diversification strategies A firms M&A strategy should satisfy the logic of corporate level strategy M&A activity can create economic value at announcement, but target firms usually capture that value M&A activity can create value over the long term for the acquiring firm
Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall. Strategic Management & Competitive
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