18 Questions
What type of M&A deal involves a company expanding its product line or international coverage?
Overcapacity M&A
In the context of M&A, what is a key consideration that should be clear before designing a merger integration approach?
Sources of desired competitive advantage
Which type of M&A deal involves a company betting on a new industry emerging and trying to establish a position by culling resources from existing industries?
Industry Consolidation M&A
What is the main purpose of using acquisitions in lieu of inhouse R&D according to the text?
To quickly build a market position
What should managers identify early in the process of a merger integration approach according to the text?
Sources of competitive value
What does a successful company do when expanding geographically according to the text?
Keep operating units local
What is the primary focus of 'Overcapacity' transactions in mergers and acquisitions?
Reducing operational redundancies
In geographic roll-up transactions in mergers and acquisitions, what is an essential aspect that needs to be maintained and grown?
Growing the acquired company's geographical marketing and sales operations
What characterizes 'Product or market extension' transactions in mergers and acquisitions?
Consolidating cultures while extracting competitively advantaged products/services
In what type of transaction would management aim to maintain and grow acquired intellectual property?
R&D-driven transactions where acquired intellectual property is retained/grown
Which type of transaction involves merging legacy companies together to take advantage of scale effects?
'Overcapacity'
'Bolt-on acquisitions' are primarily associated with which type of transaction?
'Product or market extension'
What is one of the major reasons for acquisitions according to the 2001 article mentioned in the text?
To deal with undercapacity in mature industries
Which of the following is NOT listed as one of the major reasons for acquisitions in the text?
To replace corporate leadership
What does the acquiring company gain by eliminating capacity during acquisitions?
Increased market share
In what type of industries do acquisitions occur to roll-up competitors according to the text?
Geographically concentrated industries
What does an acquiring company aim to achieve by extending into new products or markets during acquisitions?
Expanding its customer base
Why do acquisitions sometimes serve as a substitute for R&D according to the text?
To save time and resources
Study Notes
M&A Strategies
- There are five major reasons for acquisitions:
- To deal with overcapacity through consolidation in mature industries
- To roll-up competitors in geographically fragmented industries
- To extend into new products or markets
- To serve as a substitute for R&D
- To exploit eroding industry boundaries by inventing an industry
Geographic Roll-Up M&A
- A successful company expands geographically; operating units remain local
- Example: T-Mobile and Orange in the United Kingdom
Product or Market Extension M&A
- Acquisitions extend a company's product line or its international coverage
- Example: Gillette and P&G
M&A as R&D
- Acquisitions are used in lieu of in-house R&D to build a market position quickly
- Example: Merck and Schering Plough
Overcapacity M&A
- Acquisitions extend a company's product line or its international coverage
- Example: Lenovo and IBM PC
Industry Consolidation M&A
- A company bets that a new industry is emerging and tries to establish a position by culling resources from existing industries whose boundaries are eroding
Integration Approach
- Overcapacity M&A: Maintain the core part of businesses that brought competitive advantage and eliminate duplicative operations, facilities, and staff
- Geographic Roll-Up M&A: Retain and grow the attractive geographical marketing and sales operations of the acquired company
- Product or Market Extension M&A: Extract the competitively advantaged products/services in contiguous markets and consolidate cultures and core processes
- M&A as R&D: Extract the essence of the R&D operations and maintain/grow acquired intellectual property
Test your knowledge on different types of mergers and acquisitions in business strategy. Learn about geographic, product or market extension, overcapacity, and industry consolidation M&A scenarios.
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