1. Mergers and Acquisitions
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 interest in another firm with the intent of making the acquired firm a subsidiary business within its own portfolio
Takeover: a special type of an acquisition strategy wherein the target firm did not solicit the acquiring firm’s bid

2. Reasons for Making Acquisitions
Learn and develop
new capabilities
Increase
market power
Reshape firm’s
competitive scope
Acquisitions
Overcome
entry barriers
Increase
diversification
Cost of new
product development
Lower risk compared
to developing new
products
Increase speed
to market

3. Problems With Acquisitions
Integration
difficulties
Resulting firm
is too large
Acquisitions
Inadequate
evaluation of target
Managers overly
focused on acquisitions
Large or
extraordinary debt
Too much
diversification
Inability to
achieve synergy

4. Attributes of Effective Acquisitions
Results
Complementary Assets or Resources
Buying firms with assets that meet current needs to build competitiveness
Friendly Acquisitions
Friendly deals make integration go more smoothly
Careful Selection Process
Deliberate evaluation and negotiations are more likely to lead to easy integration and building synergies
Maintain Financial Slack
Provide enough additional financial resources so that profitable projects would not be foregone

5. Attributes of Effective Acquisitions
Results
Low-to-Moderate Debt
Merged firm maintains financial flexibility
Sustain Emphasis on Innovation
Continue to invest in R&D as part of the firm’s overall strategy
Flexibility
Has experience at managing change and is flexible and adaptable

6. Restructuring Activities
Downsizing
Wholesale reduction of employees
Downscoping
Selectively divesting or closing non-core businesses
Reducing scope of operations
Leads to greater focus
Leveraged Buyout (LBO)
A party buys a firm’s entire assets in order to take the firm private.