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Sunday, May 20, 2012

(Chapter 14) Merger and Acquisition strategies

Federal Trade Commission (FTC) Categories



  • Vertical merger
  • Horizontal merger
  • Product extension merger
  • Market extension merger
  • Conglomerate merger ==  A merger between firms that are involved in totally unrelated business activities. There are two types of conglomerate mergers: pure and mixed. Pure conglomerate mergers involve firms with nothing in common, while mixed conglomerate mergers involve firms that are looking for product extensions or market extensions.

    Read morehttp://www.investopedia.com/terms/c/conlgomeratemerger.asp#ixzz1vXqgA28E

Why are so many M & As ?



1. To ensure their survival
2. Free cash flow
3. Agency problems
4. Managerial hubris == Managerial hubris is the unrealistic belief held by managers in bidding firms that they can manage the assets of a target firm more efficiently than the target firm's current management. Managerial hubris is one reason why a manager may choose to invest in a merger that on average generates no profits. (By Wiki) 

5. Potential for profit


Implementation

==> Capstone. 

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