Strategic management Collaboration, Alliances, Mergers and Acquisitions Prof.Dr. E. Vatchkova

Contents 1. Definitions 2. Advantages 3. Disadvantages 4. Reasons why firms merge 5. Evidence for successful mergers and acquisitions 6. The process of mergers and acquisitions 7. Smithkline Beecham’s benefits of the merger 8. A success or failure to Glaxo Wellcome?

Definitions Merger The coming together of two organisations, often with the similar size. Usually negotiations are friendly and the merger is mutually desired. Acquisition This is an action by which one company purchases a controlling interest in another company.

Advantages of Mergers and Acquisitions: n High - speed access to resources n Less vengeance from competitors n Blocking competition n Ability to restructure the operation environment

Disadvantages of Mergers and Acquisitions: n Cultural mismatch n Mismatch in managerial salaries n Risk when purchasing the organisation n Disposal of Assets

Reasons for mergers and acquisitions: n Speed n Lack of resources n Competitive situation may require it n Cost efficiency n Financial motives n Stakeholders’ expectations n Deregulation

Evidences for successful Acquisitions and Mergers: Methods for evaluation: 1. Opinions of company personnel 2. Whether the required organisation is retained in the long - run 3. Comparison of profitability before and after the merger 4. Effect on stock market evaluation

The process of Acquisitions and Mergers: Step 1: Targeting Step 2: Negotiating Step 3: Implementing

Smithkline Beecham’s benefits of the merger: n Decrease of potential threat in success n Better synergy effect n Access to detailed patience,and thus improving drug discovery

A success or failure to Glaxo Wellcome? n The best benefit was financial n The company was brought into a field, which it had not been exploited before n Yet analysts wonder how the company has succeeded, because the company relied on too much disposal materials to gain its earnings.

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