STRATEGIES SUPPORTING

M&A

Yasmin rizwan
 REASONS FOR MERGER
Goodwill

Product Development/ Mutual Benefits

Entry Strategy/ Increase Market Share

Cost Optimization

Diversification of Risk/ Maximizing Profits

Expansion of Business

Economy of Scale
Other reasons
• Competitive advantage
• Survival
• Entering export markets
• Increase in market cap/valuations
• legislative laws/entry barriers/international laws
 MOTIVES OF M&A

Greater Value Gaining Cost

Generation Efficiency

Increase in Gain Higher

Market Share Competitiveness
 Growth strategies
❑ Ist & most important strategy for any business- as survival of a business
depends on it.
❑Need to achieve rapid growth is essential for all businesses
❑Growth strategy depends on multiple factors
❑ industry & segment
❑Competition –market size, geographies
❑Type of product – FMCG, white goods, luxury products
❑Pricing
❑Speed of growth of demand
❑Obsolescence rate /cycle
 Different growth models adopted by different cos.
❑GROWTH PLANS ALWAYS LINKED WITH BUSINESS PLANS
❑Business plans can be inclusive of strategic plans or only marketing/
revenue growth plans
❑ Depending on strategic plans- company’s opt for:
✓ organic growth strategies
✓ inorganic growth strategies
❑Various business models/tools used for assessment-
✓Product Life cycle/Industry life cycle
✓Value chain analysis
✓BCG matrix
✓Porter’s 5 forces model etc
 ORGANIC VS INORGANIC GROWTH
ORGANIC GROWTH
❑Growth achieved by a co by
enhancing sales, growing turnover,
increasing output
❑ Most teams would be
developed/grown inhouse
❑Time cosuming process- gestation
period longer (lag period)
❑Obsolescence risk/ competitive
risk/opportunity loss
INORGANIC GROWTH
❑Acquiring another business to
grow rapidly
❑ Ready sales force, capturing
market easier
❑MARKET SHARE increases
❑Cross selling opportunities
increase
❑New markets, new products
PRODUCT LIFE CYCLE HOW IS THIS USEFUL FOR M& A DECISIONS
DEPENDING ON ?
❖Stage of growth? If new business is on
introduction/growth phase, helps in top line
growth.
❖Alternately, if my business is in
intro/growth phase, I can acquire co in the
maturity/decline phase to use its
infrastructure for my product.

Sales? Duration of sales growth, elongation of

growth phase, speed of exit from decline
phase, options to change trajectory of growth
?

Time? Life term of product, valuation stage of

business, flexibility, adaptability for new
products
INDUSTRY LIFE CYCLE
REASONS
• CO A –NW 1000 Crores
• Cost of funds is 5%
• Sales 10000 crores
• Profit margin 50%

• Co B NW 250 crores
• Cost of funds is 7%
• Sales 2500 crores
• Profit margin 30%
 How does industry life cycle impact M & A?
•In terms of development stage?

•In terms of competition?

•In terms of consumers/ customers?

SWOT ANALYSIS
BCG MATRIX
DOGS: weak mkt share, low growth mkt
LESS POTENTIAL

CASH COW: high mkt share, low growth

BETTER POTENTIAL VS DOGS

QUESTION MARKS: high mkt growth,

low mkt share GOOD POTENTIAL but
uncertain

STARS: high mkt share, high growth

GOOD POTENTIAL, STRATEGY TO
MAINTAIN & GROW
 PORTER’S FIVE FORCES

Easier substitution
increases competitive
threat Less suppliers greater
limitations

Low entry barriers

Customers spoilt for choice,

negotiate harder, price wars

Easier substitution
means greater risk Stiff competition, margins reduce,
survival of the fittest
OR monopoly if no competition