4.

Strategy and MACR

Alok Kumar

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 In this session we would cover
strategic perspective towards MACR…..

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Few doubts to be cleared…..
 Is strategy a part of MACR? or
 Is MACR a part of strategy?
 How MACR and business strategy are inter-
connected?
 How MACR fit in long-term strategy of a firm?
 What is long-term strategy? (tactical vs.
strategy)

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Framework for Business
Strategies

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Few Important Strategic Concepts

 Product Life Cycle

 Boston Consulting Group Matrix
 Ansoff Matrix
 Mckinsey Growth Matrix
 Michael Porter’s forces Model
 Michael Porter’s Competitive Advantage
 Core Competence

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BCG Matrix

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Ansoff Matrix

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Mckinsey Growth Matrix

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Porter’s Five Forces Model

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Value Chain Analysis

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 Strategy in M&A
One of the most critical factor in M&A……..

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Merger Strategy
 Economic Motive Behind M&A Strategy
 Growth
 Synergy
 Diversification

 Non-Economic Motive Behind M&A Strategy

 Hubris Hypothesis (Pride of Managers)

 Winner’s Curse

 Improved management

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Growth Strategy through New
Project or M&A……?

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New Project or M&A
 If NPVM&A ⋖ NPVnew project, - (New Project

 If NPVM&A ⋗ NPVnew project, - (M&A)

 If NPVM&A = NPVnew project, - (Indifferent)

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Creating value through
Synergy
The most important aspect in any M&A

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What is Synergy?
 2+2 =5
 NAV = VAB – [VA + VB] – P – E
 Where,
 NAV – Net Acquisition Value
 VAB – the value of combine firm

 VA – the value of Firm A

 VB – the value of Firm B

 P – Premium paid for B
 E – Expenses of Acquisition

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Operating Synergy

 Revenue Enhancement

 Cost Reduction

 Economy of Scale

 Economy of Scope

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Financial Synergy

 Cost of Capital

 Capital Raising Capacity

 Tax Benefits

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Is diversification is the
name of game?
Too important to ignore……

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Diversification

 Vertical Merger

 Backward – buy your supplier

 Forward – buy your buyer

 Horizontal Merger – buy your competitors

 Conglomerate

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 Non- Economic Motives
Never been successful so far…..sad but true!

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Non-Economic Motive

 Hubris Hypothesis – arrogance and pride of

management and promoters

 Winner’s Curse – the management and promoters

think deal too important to lose it your competitors

 Improved Management – the acquirer management is

better than the of target.

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Now…..how to value the
synergy?
In the next class

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Thank You!!!!
Alok Kumar

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 Contact Detail
Alok Kumar
Mind Xpansion Portfolio Private Ltd
53/4477, Rehgar Pura
Karol Bagh, New Delhi-110005
E-Mail – alok.kumar@mindxpansion.in
alok.kuma@gmail.com

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