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[CS-2] Corporate Transactions, G7 (陳譽方 Sophie, 陳湘琳 Michelle, 米蘭 Thel Hsu,…
[CS-2] Corporate Transactions
Disney Case
Animated Movie Economics
Theme Parks
Added a resort or two
Traditional way of making animated movies
The Disney Renaissance
Pixar
Technological Revolution of animated movies
Formed a close alliance with Disney
Acquisitions of Marvel
Acquisitions of Lucasfilm
A Corporate Diverstiture
transaction that break up a larger corporation and leads to the separation of a business unit from company
not simply closing a business unit and reselling or reusing its assets
maintain more or less and its ownership is changed
Diverstiture Modes
Carve-out
the parent sells parts of its ownership in a unit
the parent still retain more than 50% ownership
slowest to excute
Unit sale
simply sold to another firm, usually for a cash compensation
fastest to excute
Spin-off
sperated completely from the parent company and have distributed shares to the parent company
Split-off is similar, but the parent shareholders can exchange their shares for the unit
create the most value
Reasons for Diverstitures
low profitability of unit
reduce risk or liability
raise cash for parent
lack of strategic fit
refocus on core business(es)
free up and redeploy resources or capabilities
free up the enterpreurial or innovative potential
Interview
Value proposition.
How to discover
Threw a metadata analysis of thousands of consumer research studies.
It just needed to be codified and rationalized.
How to create?
Figure out what customers want and compare those two.
Come up with ideas based on what customers care about.
Have conversation with customers.
Post-merger integration
The post-merger integration activities need to follow that values the thesis and become an integration thesis.
Creating lasting changing
Giving time and space to internalize why they should change and then start to practice how to change.
One by one get every person that company to want to change.
Creating a preferred future for people that people can get excited about.
Having multifaceted communication.
Notes on acquisition targets
Investment standpoint
Focus on market size, market growth, competitive positioning, and different growth opportunities.
The sources of capital.
It comes from insurance companies and pension funds.
Create value
How to judge true opportunities?
Start out with hypothesis.
Stop at the easy answer.
Be open to team members.
Pressure testing the things
Why may M&As create synergies?
Develop new capabilities:Stretching strategy
New products
For example; Tableau helps to develop complementary capabilities, products & technologies to salesforce's portfolio of it.
Technology
talent with a particular skill
Applying own Capabilities:Leveraging
Amazon’s purchase of whole foods is developed by a leveraging logic
Use online capabilities to create more value
Key point:Capabilities-based synergies
Create value surplus in the M&A
Unique case of private equity
How create value from the targets
Identify targets
Have research about how the target firm’s value can be improved
Leveraging it's capability to improve management and create value from the target
Post-merger challenges
Sometimes, firms find out that synergies don't provide to materialize
Poor evaluation
Weak diligence
Weak integration paln
Taking so much debt or risk
Integration difficulties on both operational & Organizational
A portfolio view
intertemporal effects
learning and capability augmentation
real options for future transactions
M&As, divestitures, and strategic alliances
M&As often destroy value.
Divestitures and alliance create value if managed well.
creating and freeing-up redeployable resources
acqui-hiring
hire employees and founders from the start-up
contemporaneous effects
complementarities or synergies
inter-organizational networks
alliance or divestitures networks
Companies commonly engage in multiple corporate transactions.
consider interdependency
modify and redeploy the corporate resource base
Mergers and Acquisitions
Part 3
The main reasons for doing M&As
Lower your manufacturing cost
Increase speed to market,
Increase market power
The possible problems for doing M&As
There is a big cultural difference between the acquired company and the acquirer company.
Make sure that employees of the acquired company feel they're going to be empowered in the new organization.
There may be inadequate evaluation of the target and also that may mean you pay too much for the company.
Cost may actually go up.
At some point your profitability on that y-axis starts to go down.
The bureaucratic cost of becoming too large in organization.
When should a company engage in M&As?
A three-part test
Whether this potential synergy can be at least partly captured?
Whether the companies have really thought carefully about it?
Does the M&A have the potential for creating synergies?
M&A
Merger
combining two companies in a friendly way
companies have similar standing (usually in size or valuation)
Acquisition
outright purchase or takeover in a friendly or hostile way
How M&As create value?
every M&As includes acquire and target
if an acquire wants to buy the target company, then it needs to offer a better deal to the target shareholders
acquirer's stock market
short-run
on average, neutral
long-run
usually declines
The stock market reaction shows that the combined company is less valuable than the two companies separately
why companies do merges and acquisitions.?
because some companies have a very well-honed acquisition and integration capability
overcome competitive disadvantage
get into new markets or to get access to new technology or capability
good for managers to do principal agent problem
prevent managerial hubris
Disadvantages
the winner's curse
winning firms are likely to systematically pay too much or overvalue the target.
strategic alliance
type
equity alliances
at least one firm invests in the other
technology licensing arrangements
exchange for royalties
relational contracts
for services or products from another company
joint ventures
establish a new separate legal entity that firms co-invest in.
Why firms do strategic alliances?
access capabilities or markets more quickly and surely
reduce asset commitments and maintain some flexibility
learn from partners, and thus upgrade its own resources
share costs and risks or rewards
build cooperation around a common standard
problems with strategic alliances
competitors gain access to capability
managing joint investments, risks, responses
conflict
adverse selection
partner contribution
moral hazard
monitoring
hold-up
renegotiation
How to make alliances work?
partner selection
help advance the strategic goals
create value and reduce conflict
alliance structure
contractual terms
credible commitments
manage alliances
learn from your partner
build and reinforce trust
G7
陳譽方 Sophie
陳湘琳 Michelle
米蘭 Thel Hsu
米雪 Thonn
曾姿綺 Vicky
丁莞家 Ashley
王素玲 Ling
Involved in diversification, and avoiding excessive competition, once again that can lower cost.
Full Ownership: Animation characters and Stories
$: home video rental, streaming, TV, merchandise, video games, theme parks, shows, electronic use of characters, co-branding
Sequels often outsell originals
Orchestrate this enterprise across multiple channels and overtime
A lot of the needed complementary assets
Corporate Strategy in 1950s
Corporate Strategy in 1950s
Corporate Strategy in 1989-99
in 1986
in 2009
in 2012
For example
interdependencies over time
f
long term