International M&As Flashcards

1
Q

Entry modes

A

Greenfield JV

  • ownership = shared
  • establishment - Greenfield

Greenfield WOS

  • Ownership = full
  • Establishment = Greenfield

Partial Acquisition

  • Ownership = shared
  • Establishment = acquisition

Full Acquisition

  • Ownership = full
  • Establishment = acquisition
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2
Q

M&A motives

A

Access to proprietary assets
• Speed of accessing new knowledge/resources/information • Technological synergies (sharing the cost of innovation)
• Productive synergies (economies of scale)
• Diversification
• Control of supply chain

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3
Q

Ex-ante theory: Transaction cost economics

A

Companies choose between buying on the market or making it themselves (hierarchy)

What choice is made depends on transaction costs
• Bounded rationality (search & information costs)
• Opportunistic behaviour
• Asset specificity

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4
Q

Ex-ante theory: Information economics

A

Target and focal firm do not have the same information

Adverse selection
• (financial) data reflects the status of the target firm well enough?

Moral hazard
• Will a partner behave opportunistically?

To what extent can a company rely on signals to make up for a lack of information?

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5
Q

Ex-ante theory

A

Not all decisions are fully rational
• Empire-building
• Repetition of previous strategies
• Learning/experience

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6
Q

Varieties of Capitalism and M&As

A

(1) Importance of M&As in the economy
(2) Means of payment varies across economies
(3) M&A outcomes also likely vary across national business systems

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7
Q

VoC and M&As: Importance

A

Ownership structure
• Dispersed in U.K. and U.S.
• Concentrated in continental Europe and developing economies
• Large blockholder present to block unsolicited takeover bids?

Legal protection of rights of minority shareholders
• Importance of the rights of minority shareholders in U.K. and U.S.

Purpose of the corporation
• Shareholder value vs. stakeholder value

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8
Q

VoC and M&As: Means of payment

A

Cash deals

Equity Swaps

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9
Q

Cash deals

A

Company A paying real $ for B. The latter no longer exists
• Shareholders of B always win – at least in U.K., U.S.
• Shareholders of A = assume all of the risks and rewards
• Less funds for R&D

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10
Q

Equity swaps

A

The issue of new shares by A to B for a new company AB
• The rewards and the risks are shared between the shareholders of A and B
• Mega deals are possible
• Temptation to inflate bid premiums
• Greater legal protection of minority shareholders is provided in the UK/USA as compared to China and Russia for instance

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11
Q

VoC and M&As: Outcomes

A

Corporate restructuring
• Company A acquiring company B in the UK/USA will often do so in order to
restructure company B
• Company A may fire some of the workforce of company B after its acquisition
• This is possible in the UK/USA not only because of ownership diffusion and greater legal protection for minority shareholders, but also because of labour markets that are flexible
• Post-acquisition corporate restructuring strategies is more extensive in the UK/USA because of the institutional complementarities between ownership diffusion/legal protection of minority shareholders AND flexible labour markets

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12
Q

Ex-post theory: Success?

A

Synergy prerequisite for successful acquisitions/partnerships?
E.g., Barney (1988)
• Relatedness

Focus on market power, market share, or economies of scale

Theories on friction, integration difficulties, and monitoring costs

Culture-specific theories

Communication-based theories

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13
Q

M&A Approaches

A

Acquisition Integration Approaches:

Preservation

  • need for organizational autonomy = high
  • need for strategic interdependence = low

Holding

  • need for organizational autonomy = low
  • need for strategic interdependence = low

Symbiosis

  • need for organizational autonomy = high
  • need for strategic interdependence = high

Absorption

  • need for organizational autonomy = low
  • need for strategic interdependence = high
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14
Q

Integration

A

Structure = absorb acquired company

Activities = integrate core and supporting activities

Top Executives = replace

Autonomy= none, or very limited

Speed of integration = rapid

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15
Q

Partnering

A

Structure = keep acquired company separate

Activities = selectively coordinate a few key activities

Top Executives = retain

Autonomy = Near total

Speed of Integration = Gradual

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