Takeovers

Question 1

What is a takeover

Answer 1

A takeover ( acquisition) evolves one business acquiring control of another business

Question 2

What are the reasons for takeover

Answer 2

Increase market share - monopoly / monopsony power
Advise new skills
Secure better distribution
Advise intangible assets ( brands, patents, trade marks )
Spread risk by diversifying
Overcomes barriers to entry to target markets
Eliminate competition

Question 3

Why may takeovers be preferred

Answer 3

Existing products are in the later stage of their cycle
Business racks knowledge or resources to develop organically
Speed of growth is a high priority
Competitors enjoy significant advantages that are has to overcome

Question 4

What is forward + vertical takeover

Answer 4

Acquiring a business further up in the supply chain

Question 5

What is backward + vertical takeover

Answer 5

Acquiring a business operating earlier in the supply chain

Question 6

What is horizontal takeover

Answer 6

Acquiring a business at the stage of the supply chain

Question 7

What is a conglomerate takeover

Answer 7

Acquiring a business in a totally different industry

Question 8

Advantages of horizontal integration

Answer 8

Achieve EOS
Synergies
Wider range of products
Reduces competition
Cheaper than organic growth
Barriers to entry rise

Question 9

Benefits of vertical integration

Answer 9

Greater share of profit
Reliability of suppliers
Barriers to entry are created
Control quality and branding

Question 10

Benefits of conglomerate

Answer 10

High reward
Risk is lowered as it one market fails the firm is in another
Less vulnerable to external influences

Question 11

Drawback of a takeover

Answer 11

Upfront costs
Difficult to value a company
Problems of integration (change management)
Resistance from employees