SMMCG8[CS-2] Corporate Transactions
G8 Group member
外文四 楊芯樺 Katherine
國企四 鄭淳芬 Ruby
外文四 蕭 逸 Sophia
國企三 陳宜萱 Cindy
國企三 尹薔雰 Rose
中文四 鄭淳芳 Angel
Divestitures
separate business from company
models
split-off
carve-out
spin-off
change of its ownership
separate from parent's company
share is distributed to parent's company's shareholders
shareholders have choice of exchange of the unit
parent's company retain control
IPO/investors involve
unit sales
be sold to another firm
reasons
raise cash
focus on core business
reduce the risk or liability
a lack of strategic fit
get rid of low profitability unit
free up and redeployed
resource
entrepreneurial
innovative potential
clear
open
Mergers and Acquisitions
M&As
What the distinction is between mergers and acquisitions?
mergers
acquistions
friendly approach
purchase or takeover
combining two companies
similar size
friendly or unfriendly
hostile takeover
Ex:Broadcom
Ex:Amazon Whole Foods
Do they actually create value?
acquirer offer a better deal than they're getting in the stock market
an excessive premium offered for the target
many M&As end up destroying value
Why companies do mergers and acquisitions?
access new markets or new technologies
Ex:Salesforce's acquisition of Tableau
superior acquisition and integration capability
Ex:Cisco
overcome competitive disadvantages
good for managers(principal agent problem)
managerial hubris
Introduction
Corporate Transactions
divestitures
alliances and contracts
mergers and acquisitions
a portfolio view
actions with other entities that change or manage the scope of the firm
Strategic Alliances
A Portfolio View
reduce risk
future
significance
summary
intertemporal effects
two kinds of M&A
develop new capabilities
apply the acquirer's capabilities
brings in new products, or technologies, or even talent with a particular skill set
leveraging strategy
usually finds to be value-destroying
if there are capabilities-based synergies, they can create a value surplus in the M&A.
most of the focus on M&A
carefully evaluates the target
the post-merger challenges
example : private equity
low interest rates
buy target companies and try to increase the value
improve their management
ends in exit their investment by selling off the target
taking on a lot of debt
actually no integrate the two companies and realize the synergies that were used to presumed
it is not uncommon for mergers to fail
ensuring the synergies
faithfully executing the integration plans
different cultures
a lot of the people from the acquired company leave
high turnover of the management skill
asymmetric information
do not have the available financial resources
unable to do strategies
managers may be overly focused on acquisitions, but not on the daily operations
Case study- Disney's corporate strategy
introduction
iconic hand-drawn animation characters
the company can own the characters fully
sequels often outsell originals
sequels have a built-in market that studios can target
multiple channels and overtime
TV and music
merchandising
Disneyland
comic strips
Pixar
revolutionising the making of animated movies
combining high tech advances with compelling storytelling and on-screen artistry
acquiring smaller movie studios like Pixar, Marvel and Lucasfilm
why acquisitions are value-creating for the company
doesn't shoulder all costs and risks
potential competitor
resolved conflict
learn from its partner
general conditions
equity stake
legal contractual terms
incentive
walling off key technology
mutual agreements
good relational governance
be adapted over time
lack of creative stories
use animated stories to revive Disney-related industries
changes in corporate resources over time
more permanent arrangements
learning through corporate transactions
acquire resources
forming alliance and say small equity investment
divestitures
trategic alliances
mergers and acquisitions
Google acquiring Android
destroy value
opposite phenomena of M&As
hybrid middle option
Interview
Brett Conradt Interview
Jamie Cleghorn Interview
the elements of value
discrete and measurable
Maslow's hierarchy
enduring way to create a winning strategy
putting the strategy wrapped around a customer value proposition
belief
companies don't change
people change
companies are collections of people
creating change
beach or that point of arrival
communicating
creating a preferred future for people
post-merger integration
all the synergies don't happen
Putting 80% of the energy on that 20% that's going to do
M&A itself is a skill
combine the preparation
create customer value
steps of thinking about a target to acquire
from an investment standpoint
from the macro view
the management team from the company
the private equity fund that's making the investment
investment bank who's representing the company for sale
focus on market size, market growth, competitive positioning, and different growth opportunities
look at where the capital is coming from
taking the capital and putting it to work
think bigger picture
positioning itself for sale and highlight the good things about the business
go beyond the pitch from the company
dive deep into the work and identify opportunities for growth
increase diversification
reduce risk
potentially reduce costs
increase revenue
protect managers
