SGMT 3000 Lecture Notes - Lecture 10: Kohlberg Kravis Roberts, The Blackstone Group, The Carlyle Group
9 May 2016
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5 benefits associated with diversification: can transfer distinctive competency form one division to another. Oprah: success at diversifying, wide range of oprah products, sharing resources and capabilities. Usually doesn"t work: 0ften overestimate its benefits. Often nothing to be shared or coordination costs is too high. Ebay purchased skype: paid . 6b, after 5 years, resold it and realized a loss, originally justification for purchase -> ebay links buyer and sellers, skype links too ppl, product bundling. Competneies exploit top managerial skills: entrepreneurial capabilities turnaround strategy, poster boy: onex group first step: fire all top management of the poorly managed firm replace them. Unrelated -> two arguments for unrelated (top mgmt. team skills are useful to exploit , internal capital market -> cash earned from one division can be used to fund other divisions) Not true -> in really if banks & investors cannot identify the profit reality of a division, it is unlikely related: key is coordination, identify commonality.
