Chapter 21Takeovers and Mergers
It is often quoted, but even great leaders seem to forget, that “history has a habit of repeating itself.” Company executives, directors, and the major institutional investors (whose support is often a prerequisite) need to learn the lessons and think more carefully before they commit to a takeover or merger (TOM).
REASONS FOR A TAKEOVER OR MERGER
To understand the forces at play, you need to look at the various reasons for a takeover or merger (TOM):
- Purchasing future profits from either a related or diversified sector. Here the new subsidiary is left to grow in their own way. This method is characterized by successful investment companies like Berkshire Hathaway.
- Purchasing to gain synergy. Here, the argument is 1 + 1 = 3. These are the mergers/ takeovers typically targeted by investment banks and have a history of failure.
- Purchasing for increased market share. Driven by aggressive executives, the cost frequently outweighing the ...
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