MGTS3301 Lecture Notes - Lecture 5: Takeover, Market Power, Human Capital
Document Summary
Week 5 merger, acquisition and cooperative strategies. Popularity of merger and acquisition strategies: m&a strategies are heavily influenced by the external environment, including: tight credit markets, political changes in foreign countries" orientation towards m&a, e. g. : during global financial crisis (gfc: m&a strategies can be used because of uncertainty in the competitive landscape. M&a value creation is challenging: shareholders of acquired firms often earn above-average returns from acquisitions, however, shareholders of acquiring firms earn returns that are close to zero. In two-thirds of all acquisitions, the acquiring firm"s stock price fell immediately after the intended transaction was announced: this negative response reflects investors" skepticism about projected synergies being captured. Rationale for strategy: pre-announcement returns of hostile takeovers are largely anticipated and associated with a significant increase in the bidder"s and target"s share price. Reasons for acquisitions and problems in achieving success. Firms have similar characteristics, such as: strategy: managerial styles, previous alliance management resource allocation patterns experience.
