M&A - Buy-to-Build Strategy & Vertical Integration

Question 1

what does ‘group’ mean in an entity name?

Answer 1

it comprises of subsidiaries

companies that have been acquired

Question 2

build through acquisition strategy?

Answer 2

a company building itself through acquiring smaller companies, opposed to upscaling itself

Question 3

buy & build strategy?

Answer 3

instead of growing organically, acquiring multiple companies to create one group company

Question 4

deal rationale relating to ‘buy-to-build’ strategy’?

Answer 4

acquiring a smaller company to build the company

Question 5

why would companies being bought for ‘buy-to-build’ agree to deal?

Answer 5

synergies and other benefits

e.g., price is too good to decline, market share, shareholders seek liquidity

Question 6

deal rationale for acquiring a sustainable company?

Answer 6

image enhancement by appearing more sustainable

Question 7

vertical integration

Answer 7

taking margin from different parts of a supply chain

acquiring companies from various parts of the supply chain

e.g., suppliers acquiring their manufacturers and subsequently increasing profit margins by selling for less

Question 8

is vertical integration a deal rationale?

Answer 8

yes, very smart way for companies to improve their margins and become more profitable

cost synergies

Question 9

is vertical integration problematic?

Answer 9

it can be as it can potentially be monopolistic or anti-competitive

if a company were to corner off a section of the market by owning the whole supply chain