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Mergers and Acquisitions

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19 diapositives · 611 Views · Jul 12, 2014

Mergers and Acquisitions. Mr Young. A2 Business Studies. Aims and Objectives. Aim: To understand the nature of company growth. Objectives: All Will: Define internal and external growth. All Will: Explain the benefits of growth and why firms grow.

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  1. Mergers and Acquisitions Mr Young A2 Business Studies

  2. Aims and Objectives Aim: • To understand the nature of company growth. Objectives: • All Will: Define internal and external growth. • All Will: Explain the benefits of growth and why firms grow. • Most Will: Analyse the benefits and disadvantages of external growth. • Some Will: Evaluate the effect of growth on firms and industries.

  3. Starter • Name 5 recent mergers and acquisitions

  4. Merger or Acquisition? • In your groups decide on the difference between a merger and an acquisition.

  5. Internal and External Growth • Internal Growth: expansion of a business by means of opening new branches, shops or factories. (Also known as Organic Growth). • External Growth: business expansion achieved by means of merging with or taking over another business from either the same or different industry. • Merger: an agreement by shareholders and managers of two businesses to bring both firms together under a common board of directors • Acquisition: when a company buys over 50% of the shares of another company and becomes the controlling owner of it.

  6. External Forms of Growth

  7. Backwards vertical integration. Eg. Sky takes over TV production company Same Industry – towards supplier Conglomerate Integration Same Industry – same stage of production Horizontal Integration E.g. BA and Iberia Different Industries Forwards Vertical Integration Eg. BP buys petrol stations Same industry towards the customer

  8. Which form of integration? • Horizontal Integration

  9. Which form of integration? • Backwards Vertical Integration

  10. Which form of integration? • Conglomerate Integration

  11. Which form of integration? • Horizontal Integration

  12. Which form of integration? • Conglomerate Integration

  13. External Forms of Growth Benefits • When two firms merge or integrate it is hoped it will be more: • Effective • Efficient • Profitable Due to: • Two businesses can share research/ideas. • Economies of scale. • Cost saving. Synergy Benefits: The whole is greater than the sum of parts

  14. Why Grow Internally or Externally? • Increase profit/sales. • Increase market share = greater bargaining power. • Increase economies of scale. • Increase the power and status of owners. E.g. influence government policy making. • Reduce the risk of being a takeover target.

  15. Business Presentations

  16. External Growth Merger Investigation http://news.bbc.co.uk/1/hi/business/8610124.stm http://www.bbc.co.uk/news/business-11866666

  17. Should the merger of British Airways and Iberia Airlines go ahead or not? i) You are a team of business analysts, and have been asked to investigate the case of ‘British Airways’ wanting to merge with ‘Iberia Airlines’ to form ‘International Airlines’. You are provided with various pieces of information, which you must break down and analyse as a group. Fill in your analysis in the box after each piece of evidence.

  18. Should the merger of British Airways and Iberia Airlines go ahead or not? Create a business presentation in which you evaluate each piece of evidence. You may wish to include things such as: • Identify the firms involved. • Identify the type of growth. • Identify the reasons for this merger and the impact on the airline industry. • Draw their position on the growth chart. (guidance 1) • The advantages to the firms of this merger. (guidance 3) • The disadvantages to the firms of this merger. (guidance 3) • An evaluation of whether the merger should go ahead or not.

  19. Plenary: Business Presentations