CANS 406 Lecture Notes - Lecture 13: Takeover, Unitedhealth Group, Fujifilm
22 May 2018
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March 13th, 2018
Mergers and acquisitions
Mergers and acquisitions in the news, happens very often
• Biotech/pharma
o FujiFilm holdings acquired Cellular Dynamics (manufacturing human cells) in 2015
o Teva Pharmaceuticals acquired Auspex Pharmaceuticals (central nervous stem therapies) in
2015
o UnitedHealth acquired Catamaran Corp (pharmacy benefits processing) in 2015
• Media companies
o AT&T acquired DirecTV in 2014
o Comcast acquired Time Warner Cable 2014
o Facebook acquired WhatsApp in 2014
• Companies seeking new parents
o Time Inc has put itself for sale in March 2017
o CCM put Adidas for sale in 2017
Definitions
• Merger: two firms agree to integrate their operations on a relatively co-equal basis
o Create a new corporate
• Acquisition: one firm buys a controlling, or 100% interest in another firm with the intent of
making the acquired firm a subsidiary business within its portfolio
o More common than merger
o "friend take-over", both agree to acquisition
• Takeover: an acquisition in which the target firm did not solicit the acquiring firm's bid for outright
ownership
o "hostile take-over"
Reasons for acquisition
• Increased market power
o Gain a competitor's position in industry/market
• Overcoming high entry barriers
• New products incentives
o Cost of new product development and increase speed to market
o Lower risk than developing new products
o Learnings and developing new capabilities
• Reshaping firm's competitive scope
• Increased diversification
• First and main incentive: increased market power
o Factors increase market power when
• There is the ability to sell goods or service above competitive levels
• Costs of primary or support activities are below those of competitors
• Firm's size, resources and capabilities gives it a superior ability to compete
o Acquisitions intended to increase market power are subject to
• Regulatory review
• Analysis by financial markets
o Market power is increased by
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