Strategic managementStrategic management

Collaboration, Alliances, Collaboration, Alliances, Mergers and AcquisitionsMergers and Acquisitions

Prof.Dr. E. Prof.Dr. E. VatchkovaVatchkova

ContentsContents

1.1. DefinitionsDefinitions

2.2. AdvantagesAdvantages

3.3. DisadvantagesDisadvantages

4.4. Reasons why firms mergeReasons why firms merge

5.5. Evidence for successful mergers and Evidence for successful mergers and acquisitionsacquisitions

6.6. The process of mergers and acquisitionsThe process of mergers and acquisitions

7.7. Smithkline Beecham’s benefits of the Smithkline Beecham’s benefits of the mergermerger

8.8. A success or failure to Glaxo Wellcome?A success or failure to Glaxo Wellcome?

DefinitionsDefinitions

MergerMerger

The coming together The coming together of two of two

organisations, often organisations, often with the similar with the similar

size. Usually size. Usually negotiations are negotiations are friendly and the friendly and the

merger is mutually merger is mutually desired.desired.

AcquisitionAcquisition

This is an action by This is an action by which one which one company company

purchases a purchases a controlling controlling interest in interest in

another company.another company.

Advantages of Mergers Advantages of Mergers and Acquisitions:and Acquisitions:

High - speed access to resourcesHigh - speed access to resources

Less vengeance from competitorsLess vengeance from competitors

Blocking competitionBlocking competition

Ability to restructure the operation Ability to restructure the operation environment environment

Disadvantages of Mergers Disadvantages of Mergers and Acquisitions:and Acquisitions:

Cultural mismatchCultural mismatch

Mismatch in managerial salariesMismatch in managerial salaries

Risk when purchasing the Risk when purchasing the organisationorganisation

Disposal of AssetsDisposal of Assets

Reasons for mergers and Reasons for mergers and acquisitions:acquisitions:

SpeedSpeed Lack of resourcesLack of resources Competitive situation may require itCompetitive situation may require it Cost efficiency Cost efficiency Financial motivesFinancial motives Stakeholders’ expectationsStakeholders’ expectations DeregulationDeregulation

Evidences for successful Evidences for successful Acquisitions and Mergers:Acquisitions and Mergers:

Methods for evaluation:Methods for evaluation:

1. Opinions of company personnel1. Opinions of company personnel

2. Whether the required organisation 2. Whether the required organisation is is retained in the long - runretained in the long - run

3. Comparison of profitability before 3. Comparison of profitability before and and after the mergerafter the merger

4. Effect on stock market evaluation4. Effect on stock market evaluation

The process of The process of Acquisitions and Mergers:Acquisitions and Mergers:

Step 1: TargetingStep 1: Targeting

Step 2: NegotiatingStep 2: Negotiating

Step 3: ImplementingStep 3: Implementing

Smithkline Beecham’s Smithkline Beecham’s benefits of the merger:benefits of the merger:

Decrease of potential threat in Decrease of potential threat in successsuccess

Better synergy effectBetter synergy effect

Access to detailed patience,and Access to detailed patience,and thus improving drug discoverythus improving drug discovery

A success or failure to A success or failure to Glaxo Wellcome?Glaxo Wellcome?

The best benefit was financialThe best benefit was financial The company was brought into a field, The company was brought into a field,

which it had not been exploited beforewhich it had not been exploited before Yet analysts wonder how the company Yet analysts wonder how the company

has succeeded, because the company has succeeded, because the company relied on too much disposal materials relied on too much disposal materials to gain its earnings.to gain its earnings.

THANK YOU !THANK YOU !