Strategic Management Business Policy[战略管理业务策略](PPT-42).pptVIP

Mergers and Acquisitions Reasons for Acquisitions Increased Market Power e.g., BP Amoco attempt to acquire Arco Overcome Entry Barriers e.g., entry into international markets Lower Cost of New Product Development e.g., pharmaceutical companies frequently use acquisitions to gain access to new products * Mergers and Acquisitions Reasons for Acquisitions Increased Speed to Market e.g., BMW’s acquisition of Rover Diversification e.g., Seagram’s acquisition of Universal Studios Avoiding Excess Competition e.g., General Electric’s acquisition of NBC * Mergers and Acquisitions Problems with Acquisitions Integration Difficulties e.g., Pillsbury and Burger King Inadequate Evaluation of Target e.g., Bridgestone acquisition of Firestone Large or Extraordinary Debt e.g., Campeau’s acquisition of Federated Stores * Mergers and Acquisitions Problems with Acquisitions Inability to Achieve Synergy e.g., ATT and NCR Overly Diversified e.g, GE -- prior to refocusing Overly Focused on Acquisitions e.g., Conglomerates of 1960s * * * * Sustainable Competitive Advantage Trying to gain sustainable competitive advantage via mergers and acquisitions puts us right up against the “efficient market” wall. If an industry is generally known to be highly profitable, there will be many firms bidding on the assets already in the market. Generally the discounted value of future cash flows will be impounded in the price that the acquirer pays. Thus, the acquirer is expected to make only a competitive rate of return on investment. * Sustainable Competitive Advantage And the situation may actually be worse, given the phenomenon of the winner’s curse. The most optimistic bidder usually over-estimates the true value of the firm. Quaker Oats in late 1994 purchased Snapple Beverage Company for $1.7 billion. Many analysts calculated that Quaker Oats paid about $1 billion too much for Snapple. In 1997 Quaker Oats sold Snapple for $300 million. * Sustainable Competitive Advantage Under what