Chapter 11 - Coggle Diagram
External mechanisms of growth: mergers and acquisitions (M&As)
Merger: the shareholders of the organizations come together, normally willingly, to share the resources of the enlarged (merged) organization, with shareholders from both sides of the merger becoming shareholders in the new organization.
Acquisition: a ‘marriage’ of unequal partners with one organization buying and subsuming the other party.
Takeover: technically the same as an acquisition, but the term is often taken to mean that the approach of the larger acquiring company is unwelcome from the point of view of the smaller target company.
The effects of mergers and acquisitions
One of the consequences of M&A activity is that many of the well-known ‘names’ of the past have disappeared, while some of today’s best-known companies are relatively young in their current form.
Whichever of these routes (mergers, takeovers or acquisitions) is taken, the result is a larger and usually more financially powerful company
Synergy – the main objective of mergers and acquisitions
. Synergistic benefits can arise from both organic (internal) developments, by deploying organizational resources more effectively, or externally through M&As or joint
The over-riding purpose served by integration is that of synergy
Potential problems and success factors with mergers and acquisitions
Government policy and integrations
Control of mergers and acquisitions: The example of the European Union (EU)
The relational approach to strategic management
Alternative strategic methods
In determining the methods by which strategic development will take place the management of THE organizations are faced with making a choice between three basic options. These are to:
Develop internally (or organically as it’s often called) utilizing existing available resources.
Merge with/acquire other companies or allow the company to be acquired by another company.
Develop through joint development with other organizations by making some form of collaborative arrangement.
Strategic methods in THE contexts
Organizations operating in THE have to make a choice between the various methods available to them and a full range of strategic methods are used by them.
Franchising, management contracts, strategic alliances and public–private partnerships are particularly characteristic of the sectors of THE, though the methods are not evenly represented in all sectors
Mergers and acquisitions (M&A)
Joint development Strategic alliances and joint ventures
Organic (internal) growth
The commonest mechanism of growth
Organic growth is the most straightforward mechanism of business growth.
The potential advantages and disadvantages of organic growth over other methods of development
External mechanisms of growth – Joint development
Methods of strategic development: a comparison
Methods of retrenchment