Merger, acquisitions and alliances

Question 1

strategic analysis foundations

Answer 1

• environmental assessment
• competitive positioning
• internal capability review

Question 2

Strategic Option Generation

Answer 2

Growth Direction Options
Competitive Strategy Options
SBU Portfolio Management

Question 3

How to conduct an environmental assessment?

Answer 3

• Apply PESTEL analysis to identify key external factors
• Focus on the most impactful trends affecting the industry
• consider how technological disruption creates strategic imperatives

Question 4

How to tackle competitive positioning?

Answer 4

• use porters five forces to assess industry attractiveness
• determine current positioning on cost leadership vs differentiation spectrum
• identify the basis of current competitive advantage - if any

Question 5

How to conduct an internal Capability Review

Answer 5

• apply resource based view to identify unique capabilities
• Use VRIO framework to assess sustainable competitive advantages
• Evaluate alignment between capabilities and strategic objectives

Question 6

How to analyse Growth direction options?

Answer 6

• Apply Ansoff Matrix to identify potential growth paths
• Evaluate market penetration, market development, product development and diversification
• consider which options best leverage existing competitive advantages

Question 7

How to analyse Competitive Strategy options

Answer 7

• Assess viability of cost leadership strategy
• Explore differentiation opportunities and unique value propositions
• consider focus strategies for specific market segments
• Evaluate sustainability of each competitive position

Question 8

How to determine SBU portfolio management

Answer 8

• consider strategic options for different Strategic Business Units - SBUs
• evaluate relative investment priorities across SBUs
• assess synergies and resource sharing opportunities between SBUs
• determine resource allocation strategies - growth, maintain, harvest , divest
• consider corporate parenting advantages for portfolio of SBUs

Question 9

types of strategic methods of partnership

Answer 9

organic development
mergers and acquisitions
strategic alliances

Question 10

organic development - details

Answer 10

Where a strategy is pursued by building on and developing an organisation’s own capabilities
This is essentially the “do it yourself” method

Question 11

advantages of organic development

Answer 11

Knowledge and learning can be enhanced
Spreading investment overtime - easier to finance
No availability constraints - no need to search for suitable partners or acquisition targets
Strategic independence - less need to make compromises or accept strategic constraints
Culture management - new activities with less risk of culture clash

Question 12

Mergers and acquisitions - description

Answer 12

Mergers and acquisitions are concerned with the combination of two (or more) organisations

Question 13

types of acquisitions:

Answer 13

Friendly
and
Hostile

Question 14

Friendly acquisitions - definitions

Answer 14

• Friendly acquisitions are where the targets management recommend accepting the acquirer’s deal

Question 15

Hostile acquisitions - definitions

Answer 15

• Hostile acquisitions are where the target’s management refuse the acquires offer

Question 16

strategic motives for mergers and acquisitions - three ways

Answer 16

Extension - of the reach of a firm in terms of geography, products or markets
Consolidation - increasing scale, efficiency and market power
Capabilities - enhancing technological know-how - or other capabilities

Question 17

financial motives for mergers and acquisitions- three reasons

Answer 17

• Financial efficiency - a company with a strong balance sheet - cash rich may acquire/merge with a company with a weak balance sheet
  
  • Tax efficiency - reducing the combined tax burden
  • Asset stripping or unbundling - selling off bits of the acquired company to maximise asset values

Question 18

what is the acquisition process?

Answer 18

target choice -> negotiations -> completion and change of ownership -> integration -> results

Question 19

what are the main criteria that apply for making a target choice in M&A

Answer 19

• Strategic fit - does the target firm strengthen or complement the acquiring firm’s strategy? (N.b it is easy to overestimate this potential synergy as negative synergies are often neglected)
  
  • Organisation fit - is there a match between: managerial practises, cultural practises, staff characteristics

Question 20

Haspeslagh and Jemison emphaise two key criteria:

Answer 20

• The extend of strategic interdependence - the need for transfer or sharing of capabilities and or resources
  
  • The need for organisational autonomy - sometimes the distinctiveness of the acquired company can be an advantage, but sometimes it is problematic

Question 21

what are the four approaches to integration: haspeslagh and Jemison

Answer 21

Absorption
Preservation
Symbiosis
Intensive care

Question 22

Absorption integration

Answer 22

strong strategic independence and little need for organisational autonomy. Rapid adjustment of the acquired company’s strategies, culture and systems

Question 23

Preservation integration

Answer 23

little interdependence and high need for autonomy. Old strategies, cultures and systems can be continued much as before

Question 24

Symbiosis integration

Answer 24

strong strategic interdependence but high need for autonomy. Both the acquired firm and acquiring firm learn and adopt the best qualities from each other

Question 25

intensive care integration

Answer 25

takes place where there is little to be gained by integration. These acquisitions may occur when the acquired compnay is in poor financial health and very rapid remedial action is required

Question 26

what is organisational justice?

Answer 26

Refers to the perceived fairness of managerial actions, in terms of distribution, procedure and information

Question 27

what is distributive justice?

Answer 27

refers to the distribution of rewards and posts

Question 28

what is informational justice?

Answer 28

refers to how information is used and communicated in the integration process

Question 29

what are serial acquirers?

Answer 29

serial acquirers : make multiple acquisitions - often in parallel. This enables them to build up M&A expertise

Question 30

what is Divestment?

Answer 30

the process of selling a business that no longer fits the strategy

Question 31

What is a strategic alliance?

Answer 31

where two or more organisation share resources and activites to pursue a common goal

Question 32

what is a collective strategy?

Answer 32

about how the whole network of alliances of which an organisation is a member, competes against rival networks of alliances

Question 33

what is a collaborative advantage?

Answer 33

is about managing alliances better than competitors

Question 34

two types of ownership:

Answer 34

equity alliance and non equity alliance

Question 35

what is an equity alliance?

Answer 35

involves the creation of a new entity that is owned separately by the partners involved eg Etihad airways

Question 36

what is a non equity alliance?

Answer 36

- Non equity alliance are typically looser alliances, without ownership and often based on contracts eg franchising, licensing or subcontracting

Question 37

what is a joint venture?

Answer 37

Joint venture - the most common form of equity alliance - where two organisations remain independent but set up a new organisation jointly owned by the parents

Question 38

three common forms of non-equity alliances:

Answer 38

- Franchising - Licensing - Long term subcontracting

Question 39

what are the motives for alliances?

Answer 39

- scale alliances - access alliances - complementary alliances - collusive alliances

Question 40

details of scale alliances

Answer 40

Scale alliances - lower costs, more barganing and sharing risks

Question 41

details of access alliances

Answer 41

- Access alliances - partners provide needed capabilities - distribution outlets or licenses to brands

Question 42

details of complementary alliances

Answer 42

- Complementary alliances - bringing together complementary strengths to offset the other partners weaknesses

Question 43

details of Collusive alliances

Answer 43

- Collusive alliances - to increase market power. Might be kepy secret to evade competition regulations

Question 44

what two themes are vital for the success of alliances?

Answer 44

Co-evolution - flexibility as competition evolves and Trust

Question 45

Key success factors in managing M&A and alliances:

Answer 45

- Strategic fit - Organisational fit - Correct valuation - Integration - Co evolution - Appropriate exit strategies

Question 46

key factors in choosing the method of strategy development

Answer 46

urgency uncertainty type of capabilities modularity of capabilities

Question 47

details on urgency in strategy development

Answer 47

organic development is slowest, alliances accelerate the process but acquisitions are quickest

Question 48

details on uncertainty in strategy development

Answer 48

Uncertainty - an alliance means risks and costs are shared and thus a failure means these costs are shared and thus a failure means these costs are shared

Question 49

details on the importance of type of capabilities in strategy development

Answer 49

- Type of capabilities - acquisitions work best with hard resources. Culture clash is the big issue

Question 50

details on the modularity of capabilities in strategic development

Answer 50

- Modularity of capabilities - if the needed capabilities can be clearly separated from the rest of the organisation an alliance may be best

Question 51

what is the timeline of an alliance?

Answer 51

- Courtship - findings the right partner - Negotiation - agreeing roles, ownership, profit share and responsibilities - Start up - committing resources, establishing systems, making adjustments - Maintenance- ongoing investment and operations - evolving with change - Termination - finding an exit strategy