HROB 4060 Lecture 8: HROB 4060 – week 8 (chpt. 12)

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Human Resources and Organizational Behaviour
HROB 4060
Mir Lofti

HROB 4060 week 8 Chapter 12 Mergers and Acquisitions Horizontal merger the merging of 2 competitors Vertical merger the merger of a buyer and seller or supplier Conglomerate merger the merger of 2 organizations competing in different markets Consolidation the joining of 2 or more to form a new organization Takeover one company acquiring another company The Urge to Merge Strategic benefits o Growth Leveraging current customers Opening new markets internationally Corporate venturing MA o Strengthening competitive position o Achieve complementarities Operating synergy the cost reductions achieved by economies of scale produced by an M or A (economies of scale) Economies of scope the ability of a firm to use one set of inputs to produce a wider range of products and services o Access to new markets o Redefine businesses through acquisitions o Vertical integration the MA of 2 organizations that have a buyer seller relationship o Horizontal integration MA of rivals Financial benefits o Main reason is to reduce expenses by reducing headcount, factories, andor branches o Reduce variability in their cash flow o Expect to use funds to generated by their own mature businesses to fund growing businesses (cash cow) using one to fund another can pose serious risk in the long run o Tax advantages to a takeover o Expensive to enter new markets and develop new products, acquisition results in more rapid market entries than internal innovation and product development o By acquiring and undervalued company and sometimes merging with the administration the acquiring company can achieve its financial gains Management needs o Theory 1: managers seek to acquire firms for their own personal motives and economic gains are not the primary consideration possibly why some firms pay questionably high premiums for their takeover targets
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