1. Greenfield vs. Acquisition/Merger

2. Greenfield vs. Acquisition/merger
Foreign operations require bundling imported and local factors
Greenfield: the MNE does most of the bundling
Acquisition/Merger: the MNE buys an already mostly bundled package

3. Mode of entry greenfield acquisition Partial acquisition shared
Equity Joint
Venture
Partial
acquisition
shared
ownership
Greenfield
Wholly-owned
subsidiary
Full
acquisition
full

4. Factors that affect the choice greenfield vs. acquisition
Match between MNE and local assets to be bundled
Degree of integration desired
growth rate of target market
Managerial resources of foreign investor
Risk aversion of foreign investor
Availability of targets
Legal restrictions

5. Factors that are usually bundled within firms
Trademarks
Relationships with customers
Relationships with governments
Company culture
Tacit know how

6. 1. Match between MNE and local assets
Are those factors valuable?
Are those factors hard to acquire in unbundled form?
Can those factors be bundled with MNE factors?

7. Is it efficient to bundle MNE factors with those of a local firm?
MNE competitive advantage is in marketing or management
MNE competitive advantage is in human or technological processes

8. Greenfield vs. Acquisition+ =
Acquisition + =

9. Change in Equity Price of Acquirer One Year after Acquisition for 107 Cross Border Deals, 1996-1998
Source: KPMG

10. Most acquisitions are ultimately divested
Proportion divested
(%)
1. All acquisitions 53
2. Acquisitions in new fields 61
3. Acquisitions in unrelated new fields 74
4. Joint ventures 40
(Source: Porter)

11. Acquisition challenges
a. Acquisition process
b. Post-acquisition integration

12. a. Acquisition process Choosing the right target
Paying the right price
Dealing with stakeholders (unions, government, media)

13. Acquisition process 1. Time pressure 2. Limited information
3. Lack of overall vision
4. Danger of escalating commitment (winner’s curse)

14. 1. Time Pressures in the Pre-Acquisitive Decision-Making Process
Theory
Acquisition objectives
Acquisitive search
Strategic evaluation
Financial evaluation
Negotiation
Reality (in most cases)
Acquisition objectives
Strategic evaluation
Acquisition opportunity
Financial evaluation
Negotiation

15. 2. Limited information International accounting differences
Consolidation
Extra-ordinary items
Provisions
Other undisclosed items
Environmental exposure
Other undisclosed liabilities

16. In perspective Daimler-Benz’s net profit/loss; DM bn
Sources: Extel Financial; Company reports

17. b. Post-acquisition integration
Level of integration should match expected benefits
Strategic (pre-empt competitors)
Bargaining gains (market power, purchasing economies)
Scale and scope economies (reputation, know-how, distribution)
Skill transfer

18. Need for Strategic Interdependence
Low
High
High
Preservation
Symbiosis
Need for Organizational Autonomy
Low
[Holding]
Absorption
Types of Acquisition Integration Approaches