Unit 12: Takeovers, Mergers, and Strategy Flashcards
What is the difference between a merger and a takeover or acquisition?
A merger is when a company buys ALL the shares in another company in a mutually AGREED upon transaction resulting in the formation of ONE company.
A takeover or an acquisition is when a company buys a controlling or majority stake in another company. One becoming the parent company and the other becoming the subsidiary.
What is the difference between a takeover and an acquisition?
A takeover is mostly likely hostile but an acquisition is friendly.
What does organic growth mean in business?
Organic growth is when a company becomes larger “naturally” because it is successful; NOT through mergers and acquisitions.
What does synergy mean?
Synergy means when two companies work together and benefit rather than working alone.
What does to spin off mean?
To spin off a business means to create a new company by selling or distributing new shares of its existing business.
What does divestment mean? and what is its antonym?
Divestment is the act of selling off subsidiaries; investment.
What does consolidation within a company mean?
It means when a company divests its non-core assets to focus on their core activities, the one they are best at doing and make the most profit from.
What are the three main ways companies integrate into a larger business?
1) Vertical integration - produce similar products, up/down supply chain
a) vertical backward - Apple buying Intel (chip manufacturer), car company buying tire company
b) vertical forward - lumber company buying furniture manufacturer
2) Horizontal integration - buying another company at the same level of its supply chain; its DIRECT COMPETITION
e.g. Toyota buying Honda, Airasia buying NokAir
3) Diagonal integration - buying another company in the same or similar industry; similar customer bases but offer different types of products and services; NOT in the same production line
e.g. Airline company buying carry-on luggage company
What does due diligence mean?
Due diligence means to do your homework before making a deal; it is usually one of the final steps in potential business move
What does consolidation within an industry mean?
It means when businesses start to merge with one another within an industry; NOT in a company
What does a consortium mean?
A consortium is an organization of several businesses or banks joining together for a SHARED PURPOSE, such as bidding for a government infrastructure contract or for acquiring a company. (TH=สมาคม)
What does MBO (Management Buyout) mean?
It is when a company’s top executives buy the company they work for.
