BUSI 4609 Chapter Notes - Chapter 7: Human Capital, Market Power
7 May 2018
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Chapter 7
1. popularity of merger and acquisition
a. high market power
b. spread risk
c. shift core business
merger: 2 firm operate equal basis
acquisition: 1 buy another
takeover: unfriendly acquisition
2. reason
a. high market power
i. regulatory review
ii. analysis by financial market
iii. horizontal: supplier
iv. vertical: competitor
v. relate: related industry
b. overcome entry barrier
c. low cost
d. high speed of product development
e. low risk in R&D
f. high diversification
g. reshape competitive scope
h. learn and develop new capabilities
3. problem
a. integration challenge
i. no mix culture
ii. difference financial + control system
b. inadequate evaluation of target
i. due diligence: process evaluate target firm for aqusition
ii. examine financing transaction
c. high debt
d. unable to achieve synergy
i. private: combine better internally
ii. hard to imitate
iii. hard to create
e. too much diversification
i. ST focus
ii. Substitute of innovation
iii. Rely on financial, not strategic
f. too large
g. overly focus on diversification
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