Module 9 - Mergers, acquisitions and alliances

strategic options for strategy implementation

DIY organic development

Buy merger or aquisition

Ally strategic alliance

internal: build on and develop own capabilties

external, internalize: aquisition (buy) vs merger (combine)

external, collaborative: combine resources and capabilties with other firms

Considerations?

urgency: acquisitions and mergers faster than organic growth

uncertainty: alliance is most flexible (doors open), acquisition allows slight flexibility (can be resold), organic growth least flexible

Type of capability needed: organic growth allows cultural fit

modularity and interlinkage: alliance allows right people to coordinate, natural growth preferable, if wanting to acquire one unit of other company it might be needed to buy entire company if there are strong interlinkages between units

Fortum acquisition of Uniper

Strategic motive: take advantage of transition from fossil to clean, complementaries between businesses

financial motive: low valuation of uniper, belief in strong ROI, stakeholder value

Managerial motive: sale of distribution networks allows ceo to make "big" deal

strategic motives behind mergers and acquisitions

consolidation: market power and efficiency

expansion: diversification and vertical integration- conglomerate diversification, related diversification, forward and backward integration

capability acquisition

strategic alliances

equity alliance: joint ventures, minority investment, consortium

non-equity alliance: development partnership, licensing and franchising, distribution partnership

m&a process: target choice, negotiation, integration

Summary Module 9 - Mergers, acquisitions and alliances: strategic options for strategy implementation include organic development, merger or acquisition, strategic alliance which are split between internal and external operations, but there are many considerations to think about when choosing between them. These include urgency: acquisitions and mergers faster than organic growth, uncertainty: alliance is most flexible (doors open), acquisition allows slight flexibility (can be resold), organic growth least flexible, modularity and interlinkage: alliance allows right people to coordinate, natural growth preferable, if wanting to acquire one unit of other company it might be needed to buy entire company if there are strong interlinkages between units and Type of capability needed: organic growth allows cultural fit. There are two types of strategic alliances which are: equity alliance: joint ventures, minority investment, consortium and non-equity alliance: development partnership, licensing and franchising, distribution partnership.