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CS-2 Corporate Transactions, G6 (Stephanie, Liang, Angelica, Carissa,…

- - - - access capabilities or markets more quickly and surely
        
        biotechnology and pharmaceutical companies form alliances
      - reducing asset commitments and increasing flexibility to invest in other opportunities
      - sharing costs and risks (also rewards)
      - building cooperation around a common standard
      - learning from partner; upgrading resources
    - - partners (competitors) gain access to capability, technology, or markets
      - managing joint investments, risks, responses
        
        partners may not have the same view and
        trust each other
      - adverse selection problems
        
        the choice of partner and in the type of resources or assets contributed by the partner
      - moral hazards
        
        partner's performance of his responsibilities cannot be accurately or fully monitored
      - hold-ups
        
        takes the form of opportunistic renegotiation
    - - equity alliance
        
        strategy where at least one firm invest in the other
      - rational contract
        
        long-term contract for products or services from another company
      - joint venture
        
        establishes a new separate firm that alliance partners invest in and contribute to
      - licensing
        
        contractual arrangements for access to technology, typically in exchange for royalties
    - - alliance structure
        
        contractual terms
        
        purchase / supply terms, warranties, milestones, etc.
        
        credible commitments (hostages)
        
        equity stakes, sunk investments, exclusivity, etc.
      - managing alliances
        
        learn from partner
        
        adapt structure and management over time
        
        build and reinforce trust
      - potential partner selection
        
        accept a fair distribution of benefits
        
        contribute towards creating value and reducing conflict
        
        help participants advance their strategic goals
        
        contribute valuable assets to the alliance
- - - - larger quantities
    - - Consumer
        
        Delve deeper to what the consumer's wants
        
        Brand Loyalty
      - Cost Efficiency
        
        Economies of scale
        
        average cost per unit decreases as production or service volumes increase
      - Convenience
        
        Integrate eCommerce with Other Sales Channels
        
        minimize lead times, reduce stockouts, and ensure timely delivery
      - Communication
        
        communicate clearly, transparently, and consistently with customers and suppliers
- - - - Spin off
        
        separation of a business unit from a parent company
        
        example: ITT
      - Carve-out
        
        partial sale of a business unit's shares to investor
      - Unit sale
        
        sale of business unit to another firm
      - Split off
        
        similar to spin off; but parent's shareholders may exchange parent's shares for that of the unit
    - - Raise cash for parents
      - Low profitability of unit
      - Reduce risk or liability
      - Lack of strategic fit
      - Refocus on core business(es)
      - Free up and redeploy resources/capabilities
    - - Actively evaluate divesting units
      - Clear about the goals of any given divestiture
      - Identify the right divestitures mode
      - Ensure units have the right resources
      - Pay attention to post-divestiture governance mechanisms
        
        leadership, board, cultural reset, etc
- - - - Think about company decisions from the perspective of intertemporal choices
        
        M&A :lock:
        
        Embark on one merger or form a single alliance, serving as a foundation for capability development
        
        Identify additional opportunities to expand or complement these capabilities
        
        :recycle:Perpetuating the cycle
        
        Divestiture :unlock:
        
        Envision a scenario where a company divests a particular business unit
        
        Reallocate resources and concentrate on other ventures
  - - - Build networks that gather and share valuable industry information :silhouettes:
        
        Innovation :bulb:and Profitability :moneybag:
- - - - Three-Part Test
        
        creating value?
        
        combined business has valuable synegies
        
        cost-effective?
        
        Is the value created not dissipated by the acquisition cost?
        
        strong, credible post-merger plan
        
        complementary resources & capabilities
        
        financial slack
        
        avoid cash shortage
        
        objective evaluation
        
        well implementation plan
  - - - overcome entry barriers
      - relative lower cost/risks for product development
      - increase market power
      - increased diversification
      - avoid excessive competition
    - - integration problems
      - going over the budgets
      - excessive diversification
        
        some costs can't materialize, which can't reduce the costs as expected
      - higher bureaucratic cost
      - increased debt expenses
        
        unable to do strategic plans
      - management issues
- - - - combining two companies of similar size or valuation
      - often friendly
    - - outright purchase or takeover
      - can be friendly or hostile
    - - Mergers
        
        Amazon and Whole Foods
        
        enter the food retail market
        
        Visibility and physical storefront
      - Acquisitions
        
        Singapore-based Broadcom and US tech company Qualcomm
        
        Broadcom proposed acquisition without Qualcomm's consent
  - - - beneficial for shareholders who receive a premium on their shares
    - - cause the stock price to rise, fall, or remain neutral
    - - AOL(美國線上) mergers Time Warner
        
        Expand its Internet services business and integrate media businesses
        
        Company value plummets
      - Daimler acquires Chrysler
        
        Expand its business in the automotive industry
        
        not successful
        
        Chrysler was sold
        
        Cultural conflicts, misaligned management structures, product integration issues and market changes
  - - - Salesforce's acquisition of Tableau to compete with Microsoft in the cloud software market
        
        Salesforce:Cloud Customer Relationship
        
        Gained a powerful data analysis and visualization platform
        
        Tableau is a professional data analysis and visualization software
        
        Leverage Salesforce’s resources and market channels to expand business
  - - - because multiple companies want to acquire the same company
- - - - Selective focus on valuable synergies
    - - Frequent deal-making improves acquisition skills
  - - - Integration difficulties lead to M&A failures
    - - Prioritizing critical synergies
      - Need for skilled management
  - - - Focus on buying undervalued companies
      - Improve management, then sell for profit
    - - Use of leverage to maximize returns
  - - - Research shows value creation in synergistic M&As
      - Synergies critical for justifying acquisition premiums
  - - - Stretching
        
        Adding new capabilities
      - Leveraging
        
        Enhancing existing capabilities
    - - Combining capabilities for enhanced performance
        
        Salesforce
        
        Amazon acquisitions