Key Business Concepts: Acquisition and restructuring strategies

1. Strategic Concepts
Yolanda Williams
ybowdrywilliams@gmail.com
4/29/2013

2. • Acquisition
• Merger
• Restructuring
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3. An acquisition is a strategy through which one
firm buys a controlling or 100 percent interest in
another firm with the intent of making the
acquired firm a subsidiary business within its
portfolio.
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4. It is used to achieve greater market power and
obtain a competitive advantage.
• Increased market power
• Overcoming entry barriers
• Increased speed to market
• Increased diversification
• Learning developing new competencies
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5. This strategy allows firms to generate increased assets and
wealth to meet the needs of its owners.
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6. Reasons for Acquisitions
Learning and
developing
new capabilities
Reshaping firm’s
competitive scope
Increased
diversification Lower risk than
developing new
products
Cost of new
product
development
Overcoming
entry barriers
Increase speed
to market
Increased
market power
Making an
Acquisition
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7. Acquisitions are a part of a company's growth
strategy whereby it is more beneficial to take
over an existing firm's operations and niche
compared to expanding on its own.
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8. Walmart uses acquisitions to enter new markets as it
continues to open stores in countries.
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9. A merger is a type of acquisition.
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11. A merger occurs when two firms agree to go forward as a single
new company rather than remain separately owned and
operated.
• More precisely referred to as a "merger of equals“
• Firms are often of about the same size.
• Both companies' stocks are surrendered
• New company stock is issued in its place.
Example: GlaxoSmithKline, merger of Glaxo Wellcome and
SmithKline Beecham
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12. To understand the difference between a merger and an
acquisition
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13. Major competitors:
• dominate the market they compete
• may trigger litigation regarding monopoly laws.
Example: AT&T and T-Mobile merger
Different, but complementary, products:
• Control an asset in supply chain.
Example: PayPal's merger with eBay allowed eBay to
avoid fees they had been paying, while tying two
complementary products together.
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14. Mergers are a part of a company's growth strategy
• more beneficial for companies to combine its
efforts
– increase its market power
– leverage the combined supply chain or
economies of scale
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15. Walmart doesn’t not participated in mergers
Bharti Walmart Private Limited (a joint venture)
• Bharti and Walmart hold a 50:50 stake in Bharti Walmart
Private Limited.
• Wholesale cash-and-carry
• Back-end supply chain management operations
• Within Government of India guidelines.
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16. Restructuring is a strategy through which a firm changes its
business and/or financial structure.
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17. To gain an understanding of the need for restructuring.
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18. It can help firms adapt to changes in internal and external
environments.
• Restructuring strategies:
– Downsizing
– Downscoping
– Leveraged buyouts
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20. This strategy can help firms maintain stability in the event of a
failed or difficult acquisition or to adapt to current market
conditions.
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21. Walmart uses this option to divest itself of interests
that fail due to:
• External culture
• Losses
• Market pressure.
it sold its interests in Germany to due high
competitive pressures (ALDI) and Germany’s
patriotic culture.
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