Introduction to Acquisitions
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This document discusses acquisitions, which are when one business takes a controlling interest in another. It provides examples of acquisitions and why they may be preferable to organic growth. The advantages and drawbacks of acquisitions are outlined. Reasons for acquisitions include increasing market share and accessing new skills or economies of scale. Integrations can be forward, backward, horizontal, or conglomerate. While acquisitions aim to create synergies, over 50-70% fail due to issues like overpaying or cultural clashes.
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Introduction to Acquisitions
- 1. Acquisitions
- 2. What is an acquisition? Where one business acquires a controlling interest in another business
- 3. Examples (1) December 2005 Buyer – ITV plc | price - £175million http://www.telegraph.co.uk/finance/2927757/ITV-buys-Friends-Reunited-for-175m.html December 206 Buyer – First Choice | price - £120million http://www.manchestereveningnews.co.uk/news/business/s/231/231640_first_choice_snaps_up_120m_lateroomscom.html
- 4. Examples (2) March 2004 Buyer – WM Morrisons| price - £3bn http://news.bbc.co.uk/1/hi/business/3542291.stm January 2007 Buyer – Tata| price - £5.8bn http://news.bbc.co.uk/1/hi/business/6315823.stm
- 10. Two directions of integration (1) Forward Backwards Horizontal Vertical
- 11. Two directions of integration (2) Direction Explanation Forward + vertical Acquiring a business further up in the supply chain – e.g. manufacturer buys a distributor Backward + vertical Acquiring a business operating earlier in the supply chain – e.g. a retailer buys a wholesaler Horizontal Acquiring a business at the same stage of the supply chain – e.g. a manufacturer buys a competitor Conglomerate Where the acquisition has no clear connection to the business buying it
- 12. Example (1) "This is a once in a lifetime opportunity to combine two of the most respected and well-known companies in the worldwide sporting goods industry", CEO Adidas = Horizontal integration
- 13. Example (2) Broadcaster BSkyB acquired television set-top box maker Amstrad for about £125m. Sky said that the deal meant they could now save money, design their products in-house and be more innovative. = Backward vertical integration
- 14. What is “Synergy”? The whole is greater than the sum of the individual parts
- 15. Two kinds of “synergy” Eliminate duplicated functions & services Better deals from suppliers Higher productivity & efficiency from shared assets Cost Savings Cross-selling to customers of both businesses Access to new distribution Brand extensions New geographic markets opened up Revenues
- 16. But acquisitions usually fail It is widely accepted that over 50-70% of takeovers destroy shareholder value
- 19. Keep up-to-date with business stories, resources, quizzes and worksheets for your business course. Click the logo!