DOCSLIB.ORG

Factors Affecting the Success and Failure of Company Acquisition

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Factors Affecting the Success and Failure of Company Acquisition University of Miskolc Faculty of Economics Institute of Management Science Factors Affecting the Success and Failure of Company Acquisition Oscar Hermawan 2019 Contents Contents .............................................................................................................................................2 Table of Figures .................................................................................................................................4 Tables of tables ..................................................................................................................................4 Chapter 1 Introduction .....................................................................................................................5 1.1 Background ........................................................................................................................5 1.2 Research Question .............................................................................................................6 1.3 Research Objective ............................................................................................................6 1.4 Methodology ......................................................................................................................6 1.5 Scope and limitations ........................................................................................................6 1.6 Overview ............................................................................................................................7 Chapter 2 Literature Review............................................................................................................8 2.1 Definition ............................................................................................................................8 2.1.1 Definition of Merger ..................................................................................................8 2.1.2 Definition of Acquisition ...........................................................................................9 2.1.3 The Difference between Mergers and Acquisition .................................................9 2.2 Merger and acquisition approach and strategy ..............................................................9 2.3 Buyer’s perspective ........................................................................................................ 10 2.4 Seller’s perspective ......................................................................................................... 12 2.5 Merger and Acquisition phase ...................................................................................... 13 2.6 Successful and failed merger and acquisition .............................................................. 15 2.7 Post-merger and acquisition challenges ....................................................................... 17 Chapter 3 Methodology of Research ............................................................................................ 19 3.1 Case study research ........................................................................................................ 19 3.2 Data collection ................................................................................................................ 21 3.3 Case Study Database ...................................................................................................... 21 3.4 Data and document analysis .......................................................................................... 25 3.5 Case study analysis and representation ........................................................................ 26 Chapter 4 The Case Study of Successful Acquisition ................................................................. 28 4.1 Acquisition background ................................................................................................. 28 4.2 Acquisition timeline ........................................................................................................ 29 4.3 Acquisition motivations and perspective from both sides .......................................... 32 4.4 Post-acquisition period .................................................................................................. 33 4.5 Factors of success ........................................................................................................... 34 Chapter 5 The Case Study of Failed Acquisition ........................................................................ 37 5.1 Acquisition background ................................................................................................. 37 2 5.2 Acquisition timeline ........................................................................................................ 38 5.3 Acquisition motivations and perspective from both sides .......................................... 40 5.4 Post-acquisition period .................................................................................................. 41 5.5 Factors of failure ............................................................................................................ 44 Chapter 6 Comparison between the Two Case Studies .............................................................. 46 Chapter 7 Conclusions ................................................................................................................... 49 References ....................................................................................................................................... 52 Case Study References ................................................................................................................... 53 3 Table of Figures Figure 1 - Strategic Acquisition Objectives of the Buyer ................................................................ 11 Figure 2 - Merger and acquisition process flow diagram ................................................................. 15 Figure 3 – Chain of evidence ........................................................................................................... 20 Figure 4 - Organizational Chart of Microsoft in 2007 ..................................................................... 42 Figure 5 - Organizational Chart of Microsoft in 2008 ..................................................................... 42 Tables of tables Table 1 - Selling process and seller’s decisional path ...................................................................... 13 Table 2 - Combination phase in merger and acquisition .................................................................. 14 Table 3 - Best practices in Managing Combination ......................................................................... 15 Table 4 - Microsoft - LinkedIn case database, see reference for the source .................................... 24 Table 5 - Microsoft – aQuantive case database, see reference for the source .................................. 25 Table 6 - Data analysis and representation in case study research ................................................... 27 Table 7 - LinkedIn Acquisition timeline .......................................................................................... 31 Table 8 - aQuantive Acquisition timeline ........................................................................................ 40 4 Chapter 1 Introduction 1.1 Background In the recent years, the trend of business merger and acquisition activity is getting common as one of the business restructuring strategies. The number of merger and acquisition activity is also expected to increase in the upcoming years. Throughout the merger and acquisition, both potential buyer and seller focus on creating values as acquisition may result in cost-cutting, business expansion or even becoming dominant in the market. During the period of merger and acquisition, dramatic changes will happen. That is why, good tactic and certain maneuver are required from the start of merger and acquisition until both companies integrated well. As the activity involved two or more different parties, the process is obviously complicated and challenging for the involved parties. Therefore, managing the strategy is critical as this restructuring activity would result to a successful business deal or to the worst thing that could happen is a failure. The total number of merger and acquisition process in the international scope has made some significant growth in the research field about merger and acquisition. Especially, when the economic development are shifting or the new era of emerging technologies. There will be more books, articles and scientific journal about merger and acquisition topic in the next future. The articles and books contain historical background of merger and acquisition and framework development to the detailed process within pre-combination and post- combination activities. That is some of the reasons why the thesis writer picked the merger and acquisition topic. Each of the merger and acquisition activities that already took place are unique. Because each company has its own motivation and objection to integrate to another company. And also, each leader or the chief of the company has its own style of doing the process of merger and acquisition. It is interesting to draw a line of what is happened during the transition changes. In practice, it still happens until today that merger and acquisition activity could lead to a failed one, even though articles and books reveals
Load more

Recommended publications
  • To E-Commerce EC4E Ch 01 WA 11-23.Qxd 12/10/2007 5:16 PM Page 2
    EC4E_Ch_01_WA_11-23.qxd 12/10/2007 5:16 PM Page 1 PART 1 CHAPTER 1 The Revolution Is Just Beginning CHAPTER 2 E-commerce Business Models and Concepts Introduction to E-commerce EC4E_Ch_01_WA_11-23.qxd 12/10/2007 5:16 PM Page 2 CHAPTER11 The Revolution Is Just Beginning LEARNING OBJECTIVES After reading this chapter, you will be able to: ■ Define e-commerce and describe how it differs from e-business. ■ Identify and describe the unique features of e-commerce technology and discuss their business significance. ■ Recognize and describe Web 2.0 applications. ■ Describe the major types of e-commerce. ■ Discuss the origins and growth of e-commerce. ■ Understand the evolution of e-commerce from its early years to today. ■ Identify the factors that will define the future of e-commerce. ■ Describe the major themes underlying the study of e-commerce. ■ Identify the major academic disciplines contributing to e-commerce. EC4E_Ch_01_WA_11-23.qxd 12/10/2007 5:16 PM Page 3 MySpace and Facebook: It’s All About You ow many people watched the final episode of the most popular American Htelevision show in history, the Sopranos? Answer: about 12 million (out of a total television audience size of 111 million). Only once in American history has a television show drawn more simultaneous viewers—13 million for NBC’s “America’s Got Talent” premiere in 2006. How many people visit MySpace each month? About 70 million. There are now more than 100 million personal profiles on MySpace. Almost 40 million visit MySpace’s closest social network rival, Facebook, each month.
    [Show full text]
  • Up Acquisitions: Introducing the Economic Goodwill Threshold Test Andrew Mclean
    Series A Financial Capitalism Perspective on Start- up Acquisitions: Introducing the Economic Goodwill Threshold Test Andrew McLean Centre for Law, Economics and Society CLES Faculty of Laws, UCL Director: Dr. Deni Mantzari Founding Director: Professor Ioannis Lianos CLES Research Paper Series 2/2020 A Financial Capitalism Perspective on Start-up Acquisitions: Introducing the Economic Goodwill Threshold Test Andrew McLean July 2020 Centre for Law, Economics and Society (CLES) Faculty of Laws, UCL London, WC1H 0EG The CLES Research Paper Series can be found at https://www.ucl.ac.uk/cles/research-papers All rights reserved. No part of this paper may be reproduced in any form without permission of the author. ISBN 978-1-910801-31-4 © Centre for Law, Economics and Society Faculty of Laws, UCL London, WC1H 0EG United Kingdom A Financial Capitalism Perspective on Start-up Acquisitions: Introducing the Economic Goodwill Threshold Test Andrew McLean1 Abstract This paper discusses the acquisition of start-ups by major technology firms. Such transactions pose a significant anticompetitive threat, yet often escape competition scrutiny because they fail to trigger merger notification threshold tests. Alongside a financial analysis of historic acquisitions by Google, Apple, Facebook, Amazon and Microsoft, the paper introduces a new threshold test—the economic goodwill test. The economic goodwill test is a concerned with the value of a target’s net tangible assets as a proportion of total transaction value. The difference between these figures largely represents the gains an acquirer expects to realise from a strengthened competitive position, therefore reflecting the logic driving the mass acquisition of technology start-ups.
    [Show full text]
  • From Legi(Macy to Informed Consent: Mapping Best Prac(Ces and Iden
    From legimacy to informed consent: mapping best pracces and idenfying risks A report from the Working Group on Consumer Consent May 2009 PEN paper 3 About the Working Group The Working Group on Consumer Consent is a project convened by the Information Systems & Innovation Group of the London School of Economics and Political Science and administered by 80/20 Thinking Ltd, based in London UK. The Working Group aims to bring together key industry players, consumer experts and regulators to achieve the following goals: • To better understand the implications of the Article 29 Working Party Opinion on data protection issues related to search engines (April 2008) and its potential impact on the processing of personal information in the non-search sectors. • To foster dialogue between key stakeholders to map current practices relating to notification and consent. • To inform regulators about limitations and opportunities in models and techniques for informed consent for the processing of personal information. • To help inform all stakeholders on aspects of the pending Article 29 Opinion on targeted advertising planned in 2009. Membership The members of the Working Group included: AOL, BT, Covington & Burling, eBay, Enterprise Privacy Group, Facebook, the Future of Privacy Forum, Garlik, Microsoft, Speechly Bircham, Vodafone, and Yahoo! We also sought comments from a number of privacy commissioners and regulators from across Europe. Methodology, Meetings, and Outreach We have been actively engaging with policy-makers and regulators since the creation of the group. This networking not only enhances the quality of the research, but also goes some way to identify and prepare the audience for our discussion papers.
    [Show full text]
  • View Annual Report
    TO OUR SHAREHOLDERS, CUSTOMERS, PARTNERS AND EMPLOYEES: This is a unique letter for me – the last shareholder letter I will write as the CEO of the company I love. We have always believed that technology will unleash human potential and that is why I have come to work every day with a heart full of passion for more than 30 years. Fiscal Year 2013 was a pivotal year for Microsoft in every sense of the word. Last year in my letter to you I declared a fundamental shift in our business to a devices and services company. This transformation impacts how we run the company, how we develop new experiences, and how we take products to market for both consumers and businesses. This past year we took the first big bold steps forward in our transformation and we did it while growing revenue to $77.8 billion (up 6 percent). In addition, we returned $12.3 billion (up 15 percent) to shareholders through dividends and stock repurchases. While we were able to grow revenue to a record level, our earnings results reflect investments as well as some of the challenges of undertaking a transformation of this magnitude. With this as backdrop, I’d like to summarize where we are now and where we’re headed, because it helps explain why I’m so enthusiastic about the opportunity ahead. Our strategy: High-value activities enabled by a family of devices and services We are still in the early days of our transformation, yet we made strong progress in the past year launching devices and services that people love and businesses need.
    [Show full text]
  • A Case Study on Merger of Skype and Microsoft
    European Journal of Business, Economics and Accountancy Vol. 8, No. 1, 2020 ISSN 2056-6018 VALUATION OF TARGET FIRMS IN MERGERS AND ACQUISITIONS: A CASE STUDY ON MERGER OF SKYPE AND MICROSOFT Nguyen Vuong Bang Tam Thu Dau Mot University VIETNAM [email protected] ABSTRACT Mergers and acquisitions have become the most popular used methods of growth for the company and it’s one of the best ways to make a shortcut to get the success. They create the larger potential market share and open it up to a more diversified market, increase competitive advantage against competitors. It also allows firms to operate more efficiently and benefit both competition and consumers. However, there are also many cases that the synergy between acquiring company and acquired company failed. The most common reason is to not create synergy between both of them. In recent months, the merger between Microsoft and Skype is a very hot topic of analysts and viewers…etc. This acquisition presents a big opportunity for both firms, Skype give Microsoft a boost in the enterprise collaboration. To exchange for this synergy, Microsoft paid $8.5 billion in cash for Skype, the firm is not yet profitable. Skype revenue totaling $860 million last year and operating profit of $264 million, the company lost $6.9 million overall, according to documents filed with the SEC. Is that a good deal for Microsoft? Many analysts have different point of view but most of them have negative perspective. Research was to provide the analysis of Skype’s intrinsic value with an optimistic view of point about Skype’s future, Microsoft overpaid for Skype.
    [Show full text]
  • Microhoo: Lessons from a Takeover Attempt Nihat Aktas, Eric De Bodt
    MicroHoo: Lessons from a takeover attempt Nihat Aktas, Eric de Bodt, and Richard Roll This draft: July 14, 2010 ABSTRACT On February 1, 2008, Microsoft offered $43.7 billion for Yahoo. This was a milestone in the Microsoft versus Google battle to control the internet search industry and the related online advertising market. We provide an in-depth analysis of this failed takeover attempt. We attempt to identify the sources of overbidding (signaling, hubris-overconfidence, rational overpayment) and we show that the corporate control market has a disciplinary dimension but of an incidental and latent nature. Our results highlight the existence of takeover anticipation premiums in the stock prices of the potential targets. JEL classification: G34 Keywords: Overbidding; Competitive advantage; Rational overpayment; Latent competition Aktas de Bodt Roll Univ. Lille Nord de EMLYON Business UCLA Anderson France School 110 Westwood Plaza ECCCS Address 23 av. Guy de Collongue Los Angeles, CA 90095- 1 place Déliot - BP381 69130 Ecully 1481 59020 Lille Cédex France USA France Voice +33-4-7833-7847 +33-3-2090-7477 +1-310-825-6118 Fax +33-4-7833-7928 +33-3-2090-7629 +1-310-206-8404 E-mail [email protected] eric.debodt@univ- [email protected] lille2.fr 1 MicroHoo: Lessons from a takeover attempt 1. Introduction Fast Internet access, software as a service, cloud computing, netbooks, mobile platforms, one-line application stores,…, the first decade of the twenty-first century brought all the ingredients of a new technological revolution. These new technologies share one common denominator: the Internet. Two large competitors are face to face.
    [Show full text]
  • Microsoft Acquires Massive, Inc
    S T A N F O R D U N I V E R S I T Y! 2 0 0 7 - 3 5 3 - 1! W W W . C A S E W I K I . O R G! R e v . M a y 2 9 , 2 0 0 7 MICROSOFT ACQUIRES MASSIVE, INC. May 4th, 2006 T A B L E O F C O N T E N T S 1. Introduction 2. Industry Overview 2.1. The Advertising Opportunity Within Video Games 2.2. Market Size and Demographics 2.3. Video Games and Advertising 2.4. Market Dynamics 3. Massive, Inc. ! Company Background 3.1. Founding of Massive 3.2. The Financing of Massive 3.3. Product Launch / Technology 3.4. The Massive / Microsoft Deal 4. Microsoft, Inc. within the Video Game Industry 4.1. Role as a Game Publisher / Developer 4.2. Acquisitions 4.3. Role as an Electronic Advertising Network 4.4. Statements Regarding the Acquisition of Massive, Inc. 5. Exhibits 5.1. Table of Exhibits 6. References ! 2 0 0 7 - 3 5 3 - 1! M i c r o s o f t A c q u i s i t i o n o f M a s s i v e , I n c .! I N T R O D U C T I O N In May 2007, Microsoft Corporation was a company in transition. Despite decades of dominance in its core markets of operating systems and desktop productivity software, Mi! crosoft was under tremendous pressure to create strongholds in new market spaces.
    [Show full text]
  • JOLT Template
    NORTH CAROLINA JOURNAL OF LAW & TECHNOLOGY VOLUME 10, ISSUE 1: FALL 2008 PRESERVING COMPETITION IN MULTI-SIDED INNOVATIVE MARKETS: HOW DO YOU SOLVE A PROBLEM LIKE GOOGLE? Kristine Laudadio Devine 1 The unique characteristics of the search advertising industry encourage the development of anticompetitive monopoly power, facilitating the rise and dominance of companies like Google. First, the search advertising industry is subject to multi-sided network effects that create a positive feedback loop. An increase in the number of customers on one side of the market attracts increased numbers of customers on the other side, enabling dominant firms to entrench their market power. Second, and relatedly, the search advertising industry operates in an innovative market where firms compete not to outdo competitors on price but rather to displace one another’s products entirely. In such a market, a dominant firm can acquire potentially displacing (but not substitutive) technology and thereby control future innovation, freeing itself from the burden of innovating further to maintain competitive advantage. Current regulatory enforcement, informed by traditional antitrust analysis, does not adequately account for the impact of multi-sided network effects or innovation-to-displace on competition. Retooling the regulatory regime governing merger enforcement, allowing the agencies tasked with enforcement to broaden their inquiries when investigating anticompetitive behavior of these firms, is therefore necessary to preserve competition in multi-sided innovative markets. I. INTRODUCTION On April 13, 2007, Google, the leading provider of online text- based advertising services, announced its intention to acquire DoubleClick, the leading provider of online display advertising 1 Latham & Watkins, LLP. Juris Doctor, Northwestern University School of Law, 2008.
    [Show full text]
  • Digital Outlook Report the Signs Were All There
    07 Digital Outlook Report The signs were all there. As we entered 2006, new technologies and services were creating a very different Web environment. The sudden success (and purchase) of MySpace had everyone’s attention, and the growth of Facebook indicated MySpace was not an anomaly. Blogs were clearly established, and legions of bloggers had found both a voice and an audience. The growing popularity of video on the Web was well established. “Tagging” had become a part of the lexicon, as consumers shared everything from photos to Web sites. The static Web was being replaced. In retrospect, the massive digital disruption we’ve experienced over the last 12 months should have been anticipated. But it seems few were fully prepared for the speed and depth of the changes. Perhaps it’s because the changes weren’t just about what Web sites became popular or what new technologies were introduced. Rather, it was a broader cultural change. Consumers’ expectations of their media evolved. The places they trusted to provide information and entertainment changed. 1 New outlets for consumers to express themselves emerged. In this environment, marketers are being forced to retire some long-accepted strategies for connecting with customers. In place of those dated approaches, the new digital landscape presents a chance for companies to have new, deeper, and more relevant engagement with consumers. Given the growth of interactive in 2006, it’s clear that marketers have recognized this opportunity and are ready to embrace the era of digital disruption. The following report contains statements that are forward-looking, including expectations and predictions regarding future industry trends and developments.
    [Show full text]
  • Company Name MSFT Analyst: David Trimmer & Taha Majbar Fall 2014 Recommendation: BUY Target Price Until (06/30/2016): $48.21
    Company name MSFT Analyst: David Trimmer & Taha Majbar Fall 2014 Recommendation: BUY Target Price until (06/30/2016): $48.21 1. Reasons for the Recommendation Reasons for BUY We have decided to give this stock a recommendation of buy, for we believe that the stock price will be going up in the next year. Our first reason that we give this recommendation is that the acquisition of Nokia has been expected to be a positive source of revenue for the company after an initial stage. So far Nokia has been a negative source of revenue for the company, but the sales of Nokia phones have increased by 5.6% compared to last year. This means that Microsoft was successful in keeping up with the positive trend that Nokia had, and even improve it. This also is a positive sign signaling that the company is on the right path in recovering the cost of the acquisition. The purchase of Nokia is expected to have a positive net investment after 3 years. Microsoft has made phones part of their business model and has included them in the devices and consumer sector of their operations. In the entirety of FY2014, phone hardware made up sales of just over $1.9 billion. In the first quarter of FY 2015, phone hardware made sales of $2.6 billion. This shows a very significant improvement in the sales from Nokia. Our second reason for the buy recommendation is that the cloud and internet services that they have designed are being pushed by the company, and they have been moving more towards subscription services.
    [Show full text]
  • Microsoft from Wikipedia, the Free Encyclopedia Jump To: Navigation, Search
    Microsoft From Wikipedia, the free encyclopedia Jump to: navigation, search Coordinates: 47°38′22.55″N 122°7′42.42″W / 47.6395972°N 122.12845°W / 47.6395972; -122.12845 Microsoft Corporation Public (NASDAQ: MSFT) Dow Jones Industrial Average Type Component S&P 500 Component Computer software Consumer electronics Digital distribution Computer hardware Industry Video games IT consulting Online advertising Retail stores Automotive software Albuquerque, New Mexico Founded April 4, 1975 Bill Gates Founder(s) Paul Allen One Microsoft Way Headquarters Redmond, Washington, United States Area served Worldwide Key people Steve Ballmer (CEO) Brian Kevin Turner (COO) Bill Gates (Chairman) Ray Ozzie (CSA) Craig Mundie (CRSO) Products See products listing Services See services listing Revenue $62.484 billion (2010) Operating income $24.098 billion (2010) Profit $18.760 billion (2010) Total assets $86.113 billion (2010) Total equity $46.175 billion (2010) Employees 89,000 (2010) Subsidiaries List of acquisitions Website microsoft.com Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions. Established on April 4, 1975 to develop and sell BASIC interpreters for the Altair 8800, Microsoft rose to dominate the home computer operating system (OS) market with MS-DOS in the mid-1980s, followed by the Microsoft Windows line of OSes. Microsoft would also come to dominate the office suite market with Microsoft Office. The company has diversified in recent years into the video game industry with the Xbox and its successor, the Xbox 360 as well as into the consumer electronics market with Zune and the Windows Phone OS.
    [Show full text]
  • The Economics of the Online Advertising Industry
    THE ECONOMICS OF THE ONLINE ADVERTISING INDUSTRY David S. Evans * Founder, Market Platform Dynamics Visiting Professor/University College London and Lecturer/University of Chicago Law School January 2008 Contact information: David S. Evans Market Platform Dynamics [email protected] * The author would like to thank Thomas Eisenmann, Shane Pedersen, Martin Peitz, Greg Sivinski, Daniel Garcia Swartz, and, especially, Howard Chang for many helpful insights and discussions and Marina Danilevsky, Melissa DiBella, and Sokol Vako for exceptional research support. The author has benefited from numerous discussions with people in the online advertising industry including, in particular, Scot McLernon and Bruce Jaret, who were previously with CBS Digital Media. Research support was provided by Microsoft, for which the author expresses his gratitude. One Main Street ● 3rd Floor ● Cambridge, MA 02142 Market Platform Dynamics © 2008 t. 617.374.4700 ● f. 617.474.1339 ● www.marketplatforms.com 1 ABSTRACT Online advertising has grown rapidly in the last decade. It now accounts for almost a seventh of all advertising spending and contributes to the preponderance of revenues for most websites. It is projected to increase sharply as more consumers spend time online on their personal computers and as additional devices such as mobile phones and televisions are connected to the web. This article describes the market structure of the online advertising industry and several complex economic aspects of it. Using the lens of the new economics of multi-sided platforms it examines search-based advertising platforms, as well as platforms that facilitate the buying and selling of advertising space on websites. The unique features of online advertising include the use of Internet-based technologies and data collection mechanisms to target and track specific individuals, and to automate the buying and selling of advertising inventory.
    [Show full text]