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Organizational Structure
Definition Dimensions: Specialization, Standardization, Formalization, Centralization, Configuration, Flexibility Organigrams Forms of organizational Structure
U-Form, M-Form (cooperative, competitive), H-Form, X-Form, Matrix organization Matrix organization: Advantages, disadvantages
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Overview
Merger, Acquisition, Buyout Types of Mergers Getting a picture of global M&A Reasons for M&A
NPV, 7 Motivation theories Examples: Entering markets,Restructuring, Strategic Moves, Complementaries
M&A in India
Buyouts
Buyout is defined as the purchase of a company or a controlling interest of a corporation's shares or product line or some business. A leveraged buyout is accomplished with borrowed money or by issuing more stock. Management buyout when managers purchase controlling interest from existing shareholders.
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Buyouts
Types of Mergers
Horizontal mergers: two companies in the same industry Vertical mergers: along the value chain of a good/service Product-extension: access to complementary products Market-extension: access to complementary markets Conglomerate mergers: different industries
src: Federal Trade Commission (FTC)
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Global M&A
First 6 months of 2007: $2.7 trillion 465 deals worth over $1 billion each. Avg size: $298m, 58% higher than 2006 Number of hostile bids (407) was almost four times greater. American comp. targets of more than $1 trillion-worth of deals Emerging markets were targets of $370 bil., or 13% of the world total. Banks earned $11 billion in advisory revenues in the first half of 2007 2008 15% less deals in US and 30% in Europe Third quarter 2009, about 40 percent of the acquisition deals involved divestiture, up from 25 percent one year ago.
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ALSTOM (Schweiz) AG
3. Schweizerische Rckversicherungs-Gesellschaft AG SERVICES AG Coop Genossenschaft IBM Schweiz AG Clariant International AG Parking Pr Bournoud S.A. MDTVISION AG
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Chinese M&A
Beijing wants Chinese firms to gain access to foreign technologies, raw materials and skills. In September the government established China Investment Corp (CIC) with $200 billion of the country's $1.4 trillion in foreign reserves, mostly to make purchases abroad.
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Wanted to sell 65% of shares for 1,9bn USD to an Investment firm in September 2009. But got sued by Skype founders: Ebay had forgotten to buy the IPrights for all technology used in Skype...
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Steps of an M&A (src: adapted, Galpin & Herndon, Thompson & Martin, 2005)
1. Formulate
Focus or Diversify Strengths to build on and use to create synergies Opportunities Matching Resources and Opportunities
Search process Looking behind the figures Evaluation: shared resources, transfer of skills, econ. of scale/scope
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Information available
BEFORE Organigram Data on salaries Information on top mgmt Products Plants Corp. identity, img, reputation Past records, esp. Financial
AFTER Inner philosophy &culture Quality of staff in decision roles Salary and Decision processes Interrelationships, power bases, hidden conflicts, org. politics Individually pursued objectives
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Success factors
Burgman (1983) 600 US acquisitions:
The higher the premium to acquire, the less likely to be successful Prospects of success depend on the acquirer having a functional appreciation of the business Success depends on ability to retain key managers Large acquisitions were often more successful as the sheer size required a thorough appraisal beforehand
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formulating goals locating the right company prospecting and inspecting the target company (Due Diligence) negotiating on price and conditions
Failure to integrate
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Wrap up
Definitions
Merger, Acquisition, Buyout
Types of Mergers
Horizontal, Vertical, Product-extension, Market-extension, Conglomerate mergers
References
Burgman, R. J. A strategic explanation of corporate acquisition success Purdue University, 1983 (quoted in quoted in: Mc Lean R.J. April 1985 How to make acqisitions work, Chief Executive) Thompson, J. & Martin, F. Strategic Management: Awareness and Change Thomson Learning, 2005 Harford, J. What drives merger waves? Journal of Financial Economics, 2005, 77, 529-560 Additional reading: Lubatkin, M. 1983. `Mergers and the Performance of the Acquiring Firm.' Academy of Management Journal, 8(2), 218-225.
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