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A Caring and Global University Merger Strategy (2) Presented by Josua Tarigan SE, MBA, CMA, CFP, CSRS.

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Presentation on theme: "A Caring and Global University Merger Strategy (2) Presented by Josua Tarigan SE, MBA, CMA, CFP, CSRS."— Presentation transcript:

1 A Caring and Global University Merger Strategy (2) Presented by Josua Tarigan SE, MBA, CMA, CFP, CSRS

2 A Caring and Global University Merger Strategy (Motives) Other Motives Horizontal Integration Vertical Integration Backward Integration Forward Integration Hubris Hypothesis Improved Management Improved R&D Tax Motives

3 A Caring and Global University Horizontal Integration refers to the increase in market share and market power that results from acquisitions

4 A Caring and Global University Horizontal Integration -involves a movement from the compettitive of spectrum toward the monopoly end- Pure Competition Oligopoly Monopoly

5 A Caring and Global University Case: Exxon Mobil Dec 1998, Exxon announced that it was merging with the Mobil Oil Company, which is create the largest oil company To achieve the operational synergy objective, the company try to integrate their varied resources

6 A Caring and Global University Case: Exxon Mobil Two years after combined, Exxon Mobil announced the cost saving was $4.6 billion, which is 20% higher than predicted ($3.8) In 2009 Exxon Mobil booked the revenue $459 billion, makes it as the largest company in USA

7 A Caring and Global University Case: Exxon Mobil Company Exxon-MobilRoyal Dutch ShellBP-AmocoChevron-Texaco Revenue (billion) $310.6$278.2$246.1$171.6

8 A Caring and Global University Roll-Up or Serial Acquisition Ishmail who studied 16,221 takeovers over the years found that only 1,66% did single acquisition Many of companies involved series acquistions. Larger companies buying smaller rivals.

9 A Caring and Global University Case: WorldCom WorldCom done for a series acquistion more than 40 companies WorldCom is a classic example of company run by CEO Berbie Ebbers, who was a good dealmaker but a bad manager The CEO continued to pursue deals but the company became so large that meaningful deals The result of this acquistion program was an inefficient company that spiraled into bankruptcy

10 A Caring and Global University Vertical Integration involves the acquisition of firms that are closer to the source of supply or the ultimate consumer

11 A Caring and Global University Vertical Integration Backward: acquisition movement toward the source of supply Ex: Chevron bought Gulf primarly to augment its reserves. Same as Mobil and Superior Oil Forward: acquisition movement toward marketing or retailing capability Ex: Lehman Brothers and Hutton with strong network of retail brokers

12 A Caring and Global University Motive Vertical Integration Dependable source of supplyJust-in-time inventory managementInternal transfer pricing

13 A Caring and Global University Another Motives Hubris Hypothesis, Improved Management Motive, Improved R&D Motives, Tax Motive

14 A Caring and Global University Hubris Hypothesis: Motive Hubris hypothesis implies that managers seek to acquire firms for their own personal motives Pure economic gains to the acquiring firm are not the sole motivation or the primary Hubris also call as the pride of management

15 A Caring and Global University Hubris Hypothesis: Motive This hypothesis proposed by Richard Roll However, early research failure to find the relationship between stock performance and hubris hypothesis However, the latest batch research by Seth et al found that hubris played an important role in takeover

16 A Caring and Global University Improved Management Motives 1 Some takeovers are motivated by a belief that acquiring firm’s management can better manage the target’s resource 2 The managerial resource of target company are an asset that bidder company looking

17 A Caring and Global University Improved R&D Motives 1 R&D is critically important to the future growth of many companies, particularly pharmaceutical companies. 2 This was one of the reasons for the consolidation that occured in the pharmaceutical industry in the fifth merger wave

18 A Caring and Global University Tax Motives A profitable company can buy a loss maker to use the target's loss as their advantage by reducing their tax liability Alternatively, a firm that is able to increase its depreciation charges after an acquisition will save in taxes and increase its value Beside that, the bidder company also can reduce the value added tax (PPN)

19 A Caring and Global University THANK YOU


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