3/2/2011

Mergers, Acquisitions, and Takeovers:  What Are the Differences?
Merger

Acquisition Acq isition and Rest ct ing Restructuring Strategies

A strategy through which two firms  agree to  integrate their operations on a relatively equal  basis. A strategy through which one firm buys a  controlling, or 100 percent, interest in another firm with the intent of making the acquired firm  a subsidiary business within its portfolio. A special type of an acquisition strategy wherein  the target firm does not solicit the acquiring  firm’s bid.

Acquisition

Takeover 

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Increased Market Power

Horizontal Acquisition
The acquisition of a company competing in the same industry in which the acquiring firm competes.

Vertical Acquisition
A firm acquiring a supplier of distributor of one or more of it’s goods or services.

Related Acquisitions

Horizontal Acquisitions
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Related Acquisition
The acquisition of a firm in a highly related industry.

Reasons for Acquisitions

Arcelor Mittal Becomes the Largest Worldwide Steel Producer via a Cross-Border Acquisition Strategy

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3/2/2011 Problems in Achieving Acquisition Success Reasons for Acquisitions Increased Market Power Acquisition intended to reduce the competitive balance of the industry Overcome Barriers to Entry Acquisitions overcome costly barriers to entry which may make “start-ups” economically unattractive Lower Cost & Risk of New Product Development Buying established businesses reduces risk of startup ventures 7 Reasons for Acquisitions Learn & Develop New Capabilities Overcoming Entry Barriers Barriers to Factors associated with the market or y p g with the firms currently operating in it entry Acquiring firms with new capabilities helps the acquiring firm to learn new knowledge and remain agile. Reshape the firm’s competitive scope Reducing a firm’s dependence on specific markets alters the firm’s competitive scope. that increase the expense and difficulty faced by new ventures trying to enter that particular market. Acquisitions made between companies Crosswith headquarters in different countries border acquisitions 9 Effective Acquisitions Restructuring and Outcomes 11 12 2 .

or some other means of eliminating businesses unrelated to a firm’s core businesses Downs coping Leveraged A restructuring strategy whereby a party buys all buyout (LBO) of a firm’s assets in order to take the firm private 13 3 . in the number of its operating units. but it may or may not change the composition of businesses in the company’s portfolio.3/2/2011 Restructuring Restructuring a strategy through which a firm changes its set of businesses or its financial structure. divestiture. sometimes. spin-off. Downsizing a reduction in the number of a firm’s employees and.

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