Hostile Takeover -

1. Without informing the BOD

2. Or with resistence from BOD
3. Purchase shares from open market at a price above the currentt market price
4. Bring about change in management so that new management supports the takeover
5. Highly risky since only public information is known
6. Banks not willing to fund these kind of takeovers
7. Is used only when mismanagement is known
8. Done by Arcelor & Mittal
Company Diversification vs Investor Diversification -
1. Investors should diversify
2. They can enter various sectors with zero CAPEX
3. Diversification process is quite quick
4. No need of specific expertise in the area
5. Can shut the shop any time
6. No strain on company financials
Vertical Merger Efficiencies -
1. A merger between two business firms that have a buyer-seller relationship.
2. Eliminate competition
3. Create monopoly
4. Grow business
5. Gain efficiencies
6. Avoid the hold up problem
7. Can be backward, forward or balanced
8. Sync of supply & demand
Horizontal & Vertical merger better than conglomerate merger because -
1. Economies of scale
2. Economies of scope
3. Economies of stocks
4. Deep industry knowledge
5. Deep domain knowledge
6. Better market share & reduced overall cost
7. Strategically related firms
8. Controlling many businesses becomes challenging
Operating vs Financial synergy -
1. Synergy is 2+2=5
2. Combined firm more valuable than individual firms
3. Operating Synergy brings Revenue enhancement, Cost reduction, eliminate dupli
cate efforts & facilities, reduced sales & marketing, increased market share, sc
ale & scope economies
4. Financial synergy reduces cost of capital
Three preventive antitakeover defenses -
1. Poison Pill (Shareholder rights plan), ability to buy more shares at discount
, acquirer has to go to BOD
2. Greenmail
3. Golden Parachute, Management benefits outweigh the merger benefits
4. Asset restructuring
5. Pacman defence
Major problems in merger integration process -
1. Conflicts of interest & loyalty
2. Retaining key employees
3. Corporate cultural issues, do culture audit
4. HRM & Values issues
5. Leadership vaccum
6. Sharing of resources & capabilities
Stages in integration process -
1. Deal Making
2. Stabilization
3. Capability transfer
Merger of equals probblems -
1. Daimler Chrystler
2. Same domain
3. Monopoly creation
4. Antitrust laws
5. Advance warning & hence can backfire
6. Big brother attitude
Post Merger Integration Strategies -
1. Preservation - Let the acquired firm run & nurture it, used the brand of acqu
ired company
2. Absorption - Full consolidation of operations & organizations, eliminate wast
age & improve margins
3. Symbiotic - No sharing of operational resources but sharing of functional ski
lls
Brand redeployment in Mergers -
1. Leverage brand equity
2. Gain & maintain access to customers
Ideal target profile -
1. Lay down objectives
2. Search & screen
3. Strategic evaluation
4. Financial evaluation
5. Negotiation
6. Agreement
7. PMI