Business Notes: The motives for takeovers and mergers and how these link with corporate strategy

To gain market share (market penetration (ansoff matrix))
– This will raise brand awareness and reputation
– Attract/ gain customers (acquiring customers from the other business)
– Economies of scale (Purchasing, technical, financial, managerial)

Eg. Morrisons’ takeover of Safeway (Morrisons gained a greater market share)

To protect themselves from external circumstances
– Competition
– Recession

Spread the risk (market development (ansoff matrix))

Eg. Walmart’s takeover of Asda

To remove competition
– Higher prices
– Less alternatives for customers

Eg. IAG’s takeover of BMI

Acquire their assets
– Customers
– Property/ Land (tangible assets such as buildings)
– Intangible assets (intellectual property such as patents, knowledge, expertise and skills)

Acquire supplies

Gain synergies
– The sum of the whole is greater than the individual parts

Eg. Kraft’s takeover of Cadbury

In reality there are quite often a number of reasons as to why companies takeover and merge with another company.

The most common reason as to why businesses takeover and merge are:
-To access new markets
– To maximise shareholder vale

Esjae x

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