Points to Mergers Acquisitions Joint Venture Strategic Alliances

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Definition In a merger, two Takeovers or Acquisitions happen In a joint venture, two In strategic alliances the
companies become one, when one company acquires companies conspire to achieve companies collaborate with
and one of the companies ownership or the controlling stake a specific goal, such as building each other to pursue a
often survives while the in the other company. a third company, working on an business activity. Here new
other disappears. Companies looking for rapid outside project or marketing company is not formed.
growth opportunities often adopt synergistic services. In a joint The companies remain
the takeover strategy. venture, both companies independent after the
remain separate and intact. formation of the alliance
Types Types of Mergers: Types of acquisitions: Types of Joint ventures: Types of Strategic
Alliances:
Horizontal Mergers, Friendly acquisition, co-operate with another
Vertical Mergers, & Reverse acquisition, business in a limited and Equity Strategic Alliances
Conglomerate Mergers. specific way ,
Back flip acquisition, &
Non equity Strategic
Hostile acquisition. separate joint venture Alliances
business,
Operation & logistics
Business partnership or a alliances
limited liability partnership.
Marketing, sales & service
alliances

Global Strategic Alliances

Outsourcing

Technology Licensing

Product Licensing &

Franchising.

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Points to Mergers Acquisitions Joint Venture Strategic Alliances
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Reasons 1 .The math of a merger is 1 .To achieve economies of scale 1. Spreading prices 1. Reducing risk
to form/ “1+1=3” or “2+2=5”. 2. Test new strategies
Motives 2. To achieve greater market share 2. Opening accessibility 3. Provide access to
2. Synergies through to fiscal asset more potential
Consolidation 3. To increase synergy customer
3. Connection to 4. To broaden /
3. Diversification: 4. To reduce cost technological asset extend product &
firms diversify to achieve: service offerings
5. Due to managerial Ego 4. Aid economies of scale 5. Boost market
 Sales and growth presence
stability 5. Develop stronger 6. Speed entry into
 Favorable growth innovative solution particular market
developments 7. Reduces risk and
 Favorable competition 6. Strategic move against overhead cost
shifts competition 8. Strengthen
 Technological changes reputation in the
7. Synergistic causes industry and
4. Accelerated Growth establish a friendly
8. Share & strengthen business
5. Increased Market Power technology & skill relationship

6. Increased External 9. diversification

Financial Capability

Nature Can be friendly or hostile Can be friendly or hostile Friendly Friendly

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Points to Mergers Acquisitions Joint Venture Strategic Alliances
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Benefits o Economies of o Acquisition is one of the o Sharing of costs and o Gaining capabilities
Scale: most time-efficient growth risks with partners.
The main strategies. It offers the o Sharing the
advantage of opportunity to quickly o Increased productivity financial risk,
mergers is all the acquire resources and core and greater profits.
potential competencies. o Winning the
economies of scale o Access to new political obstacle,
that can arise. o An acquisition will quickly geographical markets
In a horizontal build market presence for o Achieving synergy
merger, this could the company, increasing o Access to improved and competitive
be quite extensive, market share while resources like advantage
especially if there reducing the competition’s experienced
are high fixed costs stronghold. technicians, o Allowing each
in the industry. experienced staff, partner to
If the merger is o Immediate increases in greater capacity, concentrate on
a vertical revenues & raising capital financial resources etc. their competitive
merger or conglom advantage.
erate merger, the o Diversification of
scope for business by producing
economies of scale new products or new
would be lower. area of business.

o Mergers can help

firms deal with the o Diversification of Risk
threat of
multinationals and o Joint ventures can be
compete on an flexible. They can have
international scale. a limited life, thus
limiting both parties’

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Points to Mergers Acquisitions Joint Venture Strategic Alliances
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o Mergers may allow commitment and the
greater investment business' exposure.
in Research &
development.

o Greater Efficiency

o Protect an industry
from closing.

Disadvant o Higher Prices: A o Integration problems: The It takes time and effort to build o Risk of losing
ages merger can reduce activities of new and old control over
competition and organizations may be the right relationship and proprietary
give the new firm difficult to integrate. partnering with another information,
monopoly power. Cultural fit can be business can be challenging. especially
With less problematic. Employees regarding complex
competition and may resist it. Problems are likely to arise if: transactions
greater market requiring extensive
share, the new firm o Increased Administrative o The objectives of the coordination and
can usually Burden. intensive
venture are not 100
increase prices for information
consumers. o In an acquisition, the per cent clear and sharing.
company will have communicated to o Sharing knowledge
o Less Choice: A employees at both firms and skills can be
everyone involved.
merger can lead to performing similar jobs problematic if they
less choice for after the purchase is o Different cultures and involve trade
consumers complete. The buyer management styles secrets.
commonly fires excess o Risk of Foreign
result in poor
employees if it has too confiscation may
many workers doing the integration and co- arise.

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 o Job Losses: A same tasks after the operation.
merger can lead to buyout. Because o Risk that one
job losses. employees are concerned o The partners don't partner will
about a future layoff, some provide enough abruptly change
employees will start leadership and support priorities,
looking for other jobs or strategies, or
quit after the company in the early stages. leadership, causing
announces its acquisition o Success in a joint the alliance to
plan. venture depends on falter

o The returns from thorough research and

acquisitions may not be analysis of the
attractive. Executed cost objectives.
saving may not materialize.

o Conflicts in objectives &

disputation may arise. 

Lifespan Long term Long term Can be both short term & long Can be both short term &
term long term