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SMMC G6 [CS-2], G6 group members - Coggle Diagram

- - - - combining two companies that are roughly of a similar standing, usually in size or valuation, and having a friendly approach to the transaction.
      - e.g. Amazon Whole Foods merger
    - - outright purchases or takeovers of another company, which can be friendly or unfriendly.
      - e.g. Broadcom made unsolicited offer to buy Qualcomm.
  - - - To get into new markets or to get access to new technology or capability
      - To have superior acquisition and integration capabilities
      - To overcome competitive disadvantages
    - - Sometimes only good for managers (principal-agent problem)
      - Managerial hubris
  - - - Value goes to the target (shareholders)
    - - Short run
        
        On average, neutral
      - Long run
        
        Significant decline (on average)
  - - - We cannot expect to make better rate of return than the overall market on average after adjusting for risk
      - Acquirers are only expected to make (risk adjusted) market rates of return from M&As.
      - Unless the acquirer has some unique ability to see and generate value from the target.
      - Part of the general problem that companies can end up overpaying for targets.
    - - When you have competitive bidding for target company, effectively an auction to buy it
      - To justify a high bid, the acquirer would typically have more optimistic valuation of the target
      - The winner in an auction is not the average bidder, but the most optimistic one.
      - Over-value problem
  - - - the target brings in new products, or technologies, or even talent with a particular skill set, helping the acquirer develop new capabilities.
    - - applying the acquirer's capabilities to the target's business
    - - if there are capabilities-based synergies, they can create a value surplus in the M&A
        
        acquisition premium
  - - - eventually they exit their investment by selling off the target
        
        IPO
        
        sale to another company
    - - a combination of two things
        
        they identify targets that might be undervalued by the market for one reason or another.
        
        they have a thesis about how the target firm's value can be improved.
      - approach
        
        bring in better management
        
        from within the target
        
        from the outside
        
        leveraging strategy
        
        combination
  - - - the inability to actually integrate the two companies and realize the synergies that were presumed to exist.
    - - taking things at face value
        
        we should go beyond sort of the pitch from the company and really to dive deep into the work and into the business to identify some of those opportunities for growth
      - stopping at the easy answer or not getting a number of different opinions in the work
        
        we have to think about the parties that are involved.
        
        be open to team members and let down your ego
    - - the best mergers are done with a very clear thesis of where the value is going to come from. That can be written down, quantified, enumerated on one hand.
        
        the integration activities need to follow that values statement thesis and become an integration thesis
      - Putting 80% of the energy on that 20% is going to do it
      - really focusing on those, getting those right, whether it's merging a sales force, whether it's rationalizing a factory network, whether it's cross-selling a product into a customer
      - The other is that M&A itself is a skill and the people that get the most value from M&A have have a track record.
        
        practice makes perfect
  - - - There is a strong, credible, post-merger plan for
        realizing the synergies
      - whether the combined business has the potential for valuable
        synergies
      - This value is not dissipated by the cost of acquisition
  - - - Avoid overpaying; ready for implementation
    - - Leverage may be good, but avoid cash crunch
    - - Stretching/Leveraging synergies
    - - Identify right managers; include target’s views
  - - - increased speed to market
      - lower risk compared to developing new products
      - cost of new product development
      - increased diversification
      - overcome entry barriers
      - avoid excessive competition
      - increased market power
    - - inability to achieve synergy
      - too much diversification
      - large or extraordinary debt
      - avoid excessive competition
      - inadequate evaluation target
      - too large
      - integration difficulties
- - - - sells ownership for cash(IPO)
      - the parent retains over 50% ownership to have effective control
    - - business unit is sold to another firm for a cash compensation
    - - business unit is separated from the parent company and its shares are distributed to the parent shareholders
  - - - Increase 1.2% to 1.3% on average
    - - create the most value
  - - - To create room for these new businesses
  - - - spin-off>carve-out
- - - - relational contracts, technology licensing arrangements, equity alliances, and joint ventures
  - - - advance the strategic goals of both parties
      - contribute towards the creation of value
      - seek different benefit from the other party
      - able and willing to contribute valuable resources to the alliance
      - everyone gets a fair share of the value that's being created
    - - alliance structure
      - ongoing management of the alliance
      - partner selection
    - - negotiate a whole bunch of legal contractual terms
        
        specific goals that need to be met, and there is no need to adjust or work around things if circumstances change
      - negotiate some general conditions(broad approach)
        
        effectively ensure that the other side will behave in the expected way(self-enforcing contract/credible commitments/hostages)
    - - build and reinforce trust to supports relational governance
      - learning from partners to get capabilities
      - adapted the structure and management of the alliance over time
      - the alliance does not last forever without merge
- - - - e.g. Many companies own venture capital arms that invest in
  - - - helpful in aggregating and funneling valuable information from the industry into the company
      - helpful in research for both innovation and profit performance of companies