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Strategic Managment Study Guide

In: Business and Management

Submitted By bwallman
Words 7561
Pages 31
Chapter 7:

* Merger: a strategy through which two firms agree to integrate their operations on a relatively co-equal basis * Acquisition: a strategy through which one firm buys a controlling, or 100% interest in another firm with the intent of making the acquired firm a subsidiary business within its portfolio. After acquisition, management of the acquired firm report s to the management of the acquiring firm * Takeover: a special type of acquisition when the target firm did not solicit the acquiring firm’s bid for outright ownership * Friendly acquisition: the management of the target firm wants the firm to be acquired * Unfriendly acquisition (hostile takeover): the management of the target firm does not want the firm to be acquired (direct negotiations with the firm’s owners; tender offer; bear hug)

Explain the popularity of acquisition strategies in firms competing in the global economy * There are seven reasons why acquisitions in firms competing in the global economy work * Increased Market Power: * This is the primary reason for acquisition * If a firm achieves enough market power, it can become market leader * Example: AT&T acquisition with T-Mobile made them in the lead with market share in w-ireless service providers * Also, not only would their market share increase, but their customers would increase by 1/3 and all cell towers and wireless spectrum that t-mobile had would also turn to AT&T * Horizontal Acquisition: the acquisition of a company competition in the same industry as the acquiring firm. Increase a firm’s market power by exploiting cost-based and revenue-based synergies. * Cost-based synergies – higher performance and revenues when firms have similar characteristics * Revenue-based synergies * Vertical Acquisition: firm acquiring...

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