Exam 14: External Growth Strategies: Mergers, Acquisitions, and Alliances

Identifying the strategic rationale and likely benefits of mergers and acquisitions is easier in the case of diversifying mergers and acquisitions than for horizontal mergers and acquisitions.

The main reason that multinational corporations choose t enter emerging markets by means of a joint venture with a local partner is usually the desire t share risk rather than the need to access local knowledge and distribution channels.

Internal business ventures rather than external mergers,acquisitions and alliances are the preferred means by which most established firms achieve major extensions in the scope of their activities.

Reckitt Benckiser's multiple acquisitions of consumer products companies has been motivated by its quest for:

The main reason that a strategic alliance is often an attractive alternative to a merger or acquisition is:

Strategic alliances are only stable if they are reinforced by equity ownership between the partners.

Mergers,acquisitions,and alliances may be viewed not just as instruments of corporate strategy but as strategies in themselves.

An important lesson from the troubled development of Boeing's 787 Dreamliner is that,for developing complex,technically-advanced products,the hub firm needs to have the capability to manage networks of strategic alliances.

Studies that compare post-merger accounting profitability with the pre-merger accounting profitability of the companies involved show little consistency.This is because: it to the companies' performance prior to merging.The problem here is separating The effects of the merger from the multitude of other factors that influence Companies' performance over time.returns fails to provide conclusive evidence on the performance outcomes of mergers and acquisition is that:

The key difference between a merger and an acquisition is that,in the case of a merger,the participating companies combine to create a new company.

The tendency for M&A activity is highly cyclical,with a heavy clustering in specific sectors reflects:

Mergers and acquisitions go in waves.Because acquirers prefer to pay low prices for acquired companies,these M&A waves tend to be inversely correlated with stock market fluctuations.

Acquiring companies typically pay between 20% and 40% more than the pre-bid market capitalization to acquire target companies.The main reason for this sizable acquisition premium is:

For companies that are seeking to augment their own resource and capability base with those of another company,the choice between acquisition and strategic alliance rests primarily upon:

In the case of cross-border amalgamations of companies,concerns of national domination often mean that mergers are preferred to acquisitions.

The forces that gave rise the created the industrial districts of Italy are essentially the same as those that have caused clustering of film production companies in Hollywood and electronics and IT companies in Silicon Valley.

Issues of pre-acquisition planning and post-acquisition management should be viewed as separate: activities best led by separate teams.

Most of the biggest mergers and acquisitions since 2000 have been horizontal-i.e.between companies in the same industry.This reflects the fact that: