Acquisition and restructuring strategies - Yolanda Williams
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An acquisition occurs when one firm purchases a controlling interest in another firm to make it a subsidiary. Mergers are a type of acquisition where two firms of roughly equal size agree to combine to form an entirely new joint company. Restructuring is when a firm changes its business or financial structure, such as through downsizing or divesting interests, to adapt to internal or external environmental changes. Walmart uses acquisitions to enter new markets, participates in joint ventures like Bharti Walmart, and has restructured by divesting interests that failed due to high competition or cultural issues.
Acquisition and restructuring strategies - Yolanda Williams
- 2. • Acquisition • Merger • Restructuring 2
- 3. An acquisition is a strategy through which one firm buys a controlling or 100 percent interest in another firm with the intent of making the acquired firm a subsidiary business within its portfolio. 3
- 4. It is used to achieve greater market power and obtain a competitive advantage. • Increased market power • Overcoming entry barriers • Increased speed to market • Increased diversification • Learning developing new competencies 4
- 5. This strategy allows firms to generate increased assets and wealth to meet the needs of its owners. 5
- 6. Reasons for Acquisitions Learning and developing new capabilities Reshaping firm’s competitive scope Increased diversification Lower risk than developing new products Cost of new product development Overcoming entry barriers Increase speed to market Increased market power Making an Acquisition 7–6
- 7. Acquisitions are a part of a company's growth strategy whereby it is more beneficial to take over an existing firm's operations and niche compared to expanding on its own. 7
- 8. Walmart uses acquisitions to enter new markets as it continues to open stores in countries. 8
- 9. A merger is a type of acquisition. 9
- 10. 7– 10
- 11. A merger occurs when two firms agree to go forward as a single new company rather than remain separately owned and operated. • More precisely referred to as a "merger of equals“ • Firms are often of about the same size. • Both companies' stocks are surrendered • New company stock is issued in its place. Example: GlaxoSmithKline, merger of Glaxo Wellcome and SmithKline Beecham 11
- 12. To understand the difference between a merger and an acquisition 12
- 13. Major competitors: • dominate the market they compete • may trigger litigation regarding monopoly laws. Example: AT&T and T-Mobile merger Different, but complementary, products: • Control an asset in supply chain. Example: PayPal's merger with eBay allowed eBay to avoid fees they had been paying, while tying two complementary products together. 13
- 14. Mergers are a part of a company's growth strategy • more beneficial for companies to combine its efforts – increase its market power – leverage the combined supply chain or economies of scale 14
- 15. Walmart doesn’t not participated in mergers Bharti Walmart Private Limited (a joint venture) • Bharti and Walmart hold a 50:50 stake in Bharti Walmart Private Limited. • Wholesale cash-and-carry • Back-end supply chain management operations • Within Government of India guidelines. 15
- 16. Restructuring is a strategy through which a firm changes its business and/or financial structure. 16
- 17. To gain an understanding of the need for restructuring. 17
- 18. It can help firms adapt to changes in internal and external environments. • Restructuring strategies: – Downsizing – Downscoping – Leveraged buyouts 18
- 19. 19
- 20. This strategy can help firms maintain stability in the event of a failed or difficult acquisition or to adapt to current market conditions. 20
- 21. Walmart uses this option to divest itself of interests that fail due to: • External culture • Losses • Market pressure. it sold its interests in Germany to due high competitive pressures (ALDI) and Germany’s patriotic culture. 21
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Editor's Notes
- #16: Bharti Enterprises, one of India's leading business groups with interests in telecom, agri-business, insurance and retail, and Walmart, renowned for its efficiency and expertise in logistics, supply chain management and sourcing.
- #22: Bharti Enterprises, one of India's leading business groups with interests in telecom, agri-business, insurance and retail, and Walmart, renowned for its efficiency and expertise in logistics, supply chain management and sourcing.