takeovers and mergers
==merger-== method of external growth. its a combination of two separate businesses to make a new business.
examples; ee - orange and t mobile
- can cut costs
- grow rev and increase profits
==takeover -== one business taking control of another business
example; Microsoft took over linked in
- most common form of external growth
- it can increase market share
- acquire new skills
- access economies of scale
- secure better distribution
- spread risks by diversifying
- eliminate comp
why takeovers might be needed;
- existing products are in later stage of life cycle - can’t grow organically
- business lacks expertise/ resources
- speed of growth is high priority
drawbacks;
- risky method
- high cost
- upset customers and suppliers
- problems of integration - change of management
- incompatibility of management styles, structure and culture
why they fail;
price paid was too high - over estimate of synergies ( idea that the value/ performance of 2 companies combined will be better than the sum of individual parts)
poor communication.
loss of key personnel and customers