1. Mergers and Acquisitions
Mr Young
A2 Business Studies

2. Aims and Objectives Aim: To understand the nature of company growth.
All Will: Define internal and external growth.
All Will: Explain the benefits of growth and why firms grow.
Most Will: Analyse the benefits and disadvantages of external growth.
Some Will: Evaluate the effect of growth on firms and industries.

3. Starter
Name 5 recent mergers and acquisitions

4. Merger or Acquisition?
In your groups decide on the difference between a merger and an acquisition.

5. Internal and External Growth
Internal Growth: expansion of a business by means of opening new branches, shops or factories. (Also known as Organic Growth).
External Growth: business expansion achieved by means of merging with or taking over another business from either the same or different industry.
Merger: an agreement by shareholders and managers of two businesses to bring both firms together under a common board of directors
Acquisition: when a company buys over 50% of the shares of another company and becomes the controlling owner of it.

6. External Forms of Growth

7. Same Industry – towards supplier
Backwards vertical integration. Eg. Sky takes over TV production company
Conglomerate Integration
Same Industry – same stage of production
Horizontal Integration E.g. BA and Iberia
Different Industries
Forwards Vertical Integration
Eg. BP buys petrol stations
Same industry towards the customer

8. Which form of integration?
Horizontal Integration

9. Which form of integration?
Backwards Vertical Integration

10. Which form of integration?
Conglomerate Integration

11. Which form of integration?
Horizontal Integration

12. Which form of integration?
Conglomerate Integration

13. External Forms of Growth Benefits
When two firms merge or integrate it is hoped it will be more:
Effective
Efficient
Profitable
Due to:
Two businesses can share research/ideas.
Economies of scale.
Cost saving.
Synergy Benefits:
The whole is greater than the sum of parts

14. Why Grow Internally or Externally?
Increase profit/sales.
Increase market share = greater bargaining power.
Increase economies of scale.
Increase the power and status of owners. E.g. influence government policy making.
Reduce the risk of being a takeover target.

15. Business Presentations

16. External Growth Merger Investigation

17. Should the merger of British Airways and Iberia Airlines go ahead or not?
i) You are a team of business analysts, and have been asked to investigate the case of ‘British Airways’ wanting to merge with ‘Iberia Airlines’ to form ‘International Airlines’. You are provided with various pieces of information, which you must break down and analyse as a group. Fill in your analysis in the box after each piece of evidence.

18. Should the merger of British Airways and Iberia Airlines go ahead or not?
Create a business presentation in which you evaluate each piece of evidence. You may wish to include things such as:
Identify the firms involved.
Identify the type of growth.
Identify the reasons for this merger and the impact on the airline industry.
Draw their position on the growth chart. (guidance 1)
The advantages to the firms of this merger. (guidance 3)
The disadvantages to the firms of this merger. (guidance 3)
An evaluation of whether the merger should go ahead or not.

19. Plenary: Business Presentations