Mergers and Acquisitions (M&A): a process perspective

Published on March 31, 2015   27 min

Other Talks in the Series: Hot Topics

0:00
Hi. My name is Mehdi Safavi, and I am an early career fellow in strategy and international business at the University of Edinburgh Business School. In this talk, I will take you through a short tour on the topic of integrated business ventures, namely Mergers and Acquisitions, or M&A, while introducing to you the process perspective in mergers and acquisitions research, which initiated by Haspeslagh, Jemison and Sitkin in early '90s.
0:27
As you can see in the talk's agenda, I will spend a few minutes first to define mergers and acquisitions briefly, providing few examples. Then I take you through various corporate strategies in line with conducting mergers and acquisitions. Then I'll list the general advantages and disadvantages of mergers and acquisitions deals. Provided a brief basic understanding, I then focus on the main task of this talk, which is to provide an overview to the process perspective in integrative ventures. Based on these, I then discuss the potential benefits of mergers and acquisitions and highlight the role of integration in the success or failure of these integrative ventures. Based on Haspeslagh and Jemison's work, I then provide you with various integration approaches and an example from my own research, hopefully for a better understanding of the phenomenon.
1:21
Let's define a merger first. A merger is a transaction involving two or more corporations in which stock is exchanged but in which only one corporation survives.
1:35
Examples include various industries. For example, a famous merger between Daimler and Chrysler, the world's largest cross-border deal ever, which lasted for almost nine years. Indeed, in 1998, in a so-called merger of equals, Daimler-Benz and Chrysler corporation merged in an exchange of shares in which Daimler bought 92% of Chrysler. However, Chrysler suffered a series of setbacks, plus the fact that very low level of synergy effects were realized between the two companies. As a result, in 2007, Daimler-Benz sold the unit to Cerberus Capital Management for $6 billion. Another example in banking industry, Dai-Ichi Bank in 1971 merged with Nippon Kangyo Bank. Later on, they combined with Fuji Bank and Industrial Bank of Japan to form Mizuho Financial Group. Another example is the University of Edinburgh, which has a great history in mergers. The university has merged with various other academic and research institutions. For example, it merged with the New College during the 1930s or the Royal Veterinary School in 1951. Also, it merged with Moray House's School of Education in 1998 and with the Roslin Institute in 2008. Recently, it merged with Edinburgh College of Art. I will use the last one as an example later on in this talk to elaborate on various integration approaches.
3:09
Now let's define an acquisition. An acquisition is a purchase of a company that is completely absorbed as an operating subsidiary or division. A handful of highly praised firms, for example, Cisco Systems, General Electric, or Volkswagen, have built strong reputation as master acquirers based primarily on their excellence at integrating acquisitions. Such firms, however, still appear to present a minority, since at least three out of every five merger and acquisition deals resort in an ineffective integration.
3:45
Acquisition examples include Deutsche Post DHL acquisition of the US firm DHL for $2.7 billion, or the ground delivery network of US-based Airborne for $1 billion, both for expansions in the United States. Or 81% of Indian Express company Blue Dart for expansion in Asia, or Britain's Exel, with its 110,000 employees in 130 countries for expansion mainly in Europe. Another example is Tata Motors, India's largest automaker, which acquired Jaguar and Land Rover from Ford in 2008 for $2.3 billion, or 70% of Miljo, a Norwegian electric vehicle maker, or Daewoo Commercial vehicle company, a leading manufacturer of truck and tractors. Another example is Renault, acquired 25% of AutoVAZ, a car factory in Russia, for $1 billion. A very familiar example is Facebook, which acquired Instagram photo sharing network with only 13 employees for $1 billion in 2012. Two years later, Facebook acquired WhatsApp for $19 billion. Or a very successful example is Procter and Gamble acquisition of Gillette for $57 billion in 2007, and many more examples.
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Mergers and Acquisitions (M&A): a process perspective

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