Merger vs. Acquisition
This is the joining of two independent companies to form a combined entity.
What is a merger
This type of integration occurs when firms merge with competitors at the same stage of the value chain.
What is horizontal integration?
Firms sometimes pursue M&A to achieve these cost savings or revenue enhancements.
What are synergies?
In most cases, M&A activity does or does not create competitive advantage?
What is does not create competitive advantage?
This occurs when one company purchases or takes over another.
What is an acquisition?
One major benefit of horizontal integration is achieving these cost advantages from increased scale.
What are economies of scale?
A company might acquire a competitor to do this before its rivals can.
What is preempt rivals?
Many M&As fail because firms do not realize these anticipated benefits.
What are anticipated synergies?
This type of acquisition occurs when the target company does not want to be acquired.
What is a hostile takeover?
Firms often use acquisitions to overcome these when entering new industries or markets.
What are entry barriers?
This strategic goal refers to strengthening a firm’s position relative to competitors.
What is strengthening competitive position?
This problem occurs when managers pursue acquisitions for personal gain rather than shareholder value.
What is the principal-agent problem?
In this structure, two firms combine and often create a new or integrated organization.
What is a merger?
Companies may acquire firms to gain new ______ or competencies they do not currently possess.
What are capabilities?
Synergies can come from either cost reductions or sharing of these strategic elements.
What are capabilities/resources?
This refers to managerial overconfidence that can lead to poor acquisition decisions.
What is managerial hubris?
In this type of transaction, the acquiring firm retains control and the target ceases to exist independently.
What is an acquisition?
When a firm acquires another to reduce competitive intensity and strengthen its market position, it is pursuing this broad corporate strategy.
What is corporate strategy execution through M&A?
Reducing the number of competitors in an industry can lead to lower competitive intensity and potentially higher ______.
What are profits?
M&A can create competitive advantage only if the firm has superior ______ and integration capability.
What is acquisition capability?