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Revision Presentation - Problems of Takeovers and Mergers including Integration

Sunday, June 15, 2014

This streamed revision presentation examines the problems of takeovers and mergers including difficulties integrating businesses successfully

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Revision Presentation - Impact On and Reaction Of Stakeholders to Takeovers and Mergers

This streamed revision presentation outlines some evidence of the impact on, and reaction of, stakeholders to takeovers and mergers

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Revision Presentation - Impact of Takeovers and Mergers on Business Performance

This streamed revision presentation looks at the impact of takeovers andmergers on the performance of the businesses involved.

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Revision Presentation - Factors Influencing the Success of Takeovers and Mergers

This streamed revision presentation considers the factors influencing the success of takeovers and mergers

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Revision Presentation - Motives for Takeovers and Mergers

This streamed revision presentation considers the motives for takeovers and mergers and how these link with corporate strategy

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Set the Scene for a Top-Scoring Essay with an Essay Introduction

Thursday, October 03, 2013

The Examiners Report for the June 2013 sitting of AQA BUSS4 makes a very interesting comment.

It suggests that students who write a suitable introduction to each of their two essays can contribute to a better-performing and, therefore, higher-scoring essay.

This makes perfect sense and it follows from something that we emphasis on our exam coaching workshops for BUSS4. Good BUSS4 essays start with a plan. Good essays know what they are trying to argue.

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Google and Youtube - One of the Best Takeovers in History?

Sunday, August 11, 2013

I've been updating my records of large takeovers and mergers in recent years and looking at whether shareholder value was created or destroyed by each deal.

One takeover which strikes me as being highly successful is that of YouTube by Google. Here is some evidence that supports that view.

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A Big Takeover in Media Market: Virgin Media Sold to Liberty Global for £15bn

Thursday, February 07, 2013

Usain Bolt will have a new boss to impersonate now. US billionaire John Malone's cable group, Liberty Global, has agreed to buy the UK's Virgin Media in a cash and stock deal worth $23.3bn (£15bn). The takeover will create the world's largest broadband company (with 25 million customers in 14 countries) and a stronger competitor for BSkyB in the UK which is the clear market leader with over 10 million household subscribers.

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HMV’s strategy of diversification comes to an end

Tuesday, December 04, 2012

HMV's previous attempt at a strategy of diversification has now ended after it agreed to dispose of its business units involved in live music and entertainment. Lots of evidence in this case study about how risky diversification can be. HMV paid £46m to acquire MAMA Group back in 2010:

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Takeovers and Mergers - Irn-Bru Meets Fruit Shoot

Wednesday, November 14, 2012

It sounds like an odd combination - mixing Irn-Bru with Fruit Shoot. But you never know - it might work. Shareholders in the firms that make Irn-Bru (AG Barr) and Fruit Shoot (Britvic) will be hoping that the combination of their respective product portfolios will taste a little better after a £1.5bn merger which has been agreed today. 

The merger will be bad news for some employees at the two businesses. As part of the merger plan up to 500 jobs are expected to be lost as the combined business aims to achieve £35m of annual cost-saving by cutting the combined headcount of 4,000 workers by 8-12%.

It is claimed that the aim of the merger is to "create a world-class soft drinks company" and, not surprisingly, the management who will lead the combined firm are pretty positive about the strategic rationale for the merger:

"AG Barr and Britvic are a fantastic fit with complementary strengths and we will benefit from very significant synergies," claims Gerald Corbett, the chairman of Britvic who will continue in the same role at the combined company.

Takeovers and Mergers: Nike Kicks Umbro into Row Z

Thursday, October 25, 2012

The football business has a history of helping investors to lose money. And now it seems that the shareholders in Nike have been hit hard by an investment that simply hasn't paid off. 

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Takeovers and Mergers - the last Car Rental deal?

Tuesday, August 28, 2012

Will this prove to be the last takeover of a major care rental firm in the US? After five years of trying, market-leading car rental company Hertz has bought its rival Dollar Thrifty for $2.3bn (£1.5bn). However, as this article in the Guardian explains, this may be the last significant takeover in the car rental sector to be allowed by US competition regulators. Why?  Because the market is now dominated by just three firms.

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For Sale - One Airport, Used, Price £1bn. All Offers Considered

Monday, August 20, 2012

A great example of competition regulation in action here. 

Back in 2009 by the Competition Commission told BAA that it must reduce its stranglehold on the UK aviation market. Part of the instruction was that BAA must dispose of Gatwick Airport (which it sold in December 2009) and Edinburgh Airport (which was sold by BAA in April 2012). However, BAA has been trying to hang onto Stansted, taking the decision through the courts in a long drawn-out process. Now that process is over - it has to sell the airport.

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Takeovers and Mergers - Google Takes the Knife to Motorola Mobility

Monday, August 13, 2012

​This is a good example of significant cost synergies being squeezed from a major takeover.  Google, which acquired Motorola Mobility (a manufacturer of mobile phones) for $12.5bn, has decided to make 20% of Motorola’s workforce redundant. That’s around 4,000 employees who will lose their jobs.

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Takeovers and Mergers - How to Destroy 99% of a Takeover’s Value

Tuesday, July 03, 2012

Microsoft’s takeover of AQuantive for $6.3bn in 2007 must now go down as one of the least successful acquisitions in recent history. In its most recent quarterly results, Microsoft has announced that it is “writing down” the value of its investment in AQuantive by $6.2bn (i.e. just about all of it), to reflect the significantly lower value of the business just five years on.

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BUSS4 STOP PRESS: US retailer Walgreen buys 45% stake in Alliance Boots

Tuesday, June 19, 2012

News has been released this afternoon that Walgreen, a US company that operates 7,890 pharmacies across the United States, is buying a 45% stake in Boots, which has more than 3,300 health and beauty retail stores in the UK and 11 countries around the world, a strong internet retail presence, a manufacturing facility in Nottingham, as well as a wholesale business which supplies pharmacies and doctors in 21 countries. The deal, which is being reported as a MERGER rather than a takeover, has been under discussion for 18 months, although it still has to be agreed by regulators. Walgreen also have the option to take the remaining 55% of the shares in the next three years.

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Plan your BUSS4 Essay!

Sunday, June 17, 2012

How and why to plan your essays in BUSS4

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Starbucks chooses the takeover option to diversify into baking

Starbucks has just made its largest-ever acquisition, paying $100m for San Francisco-based Bay Bread.  The acquisition is part of Starbuck’s strategy of diversifying its product offering and boosting the importance of food at its 17,400 outlets worldwide.

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AQA BUSS4 Revision Clinic

Saturday, June 16, 2012

Our final business studies revision clinic takes place on Monday evening at 9pm - focusing on AQA BUSS4. Please login using your Facebook or Twitter account to participate. A full transcript of the session will be available on this blog entry once the clinic has finished.

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Five core topics for BUSS4 Section B on 21 June 2012

Friday, June 15, 2012

Students can be forgiven for over-researching takeovers and mergers for Section A - an inevitable response given the nature of pre-release materials. However, it is important to remember that the Section B essay has exactly the same number of marks (40) as Section A. An essay of the same quality is required and it is important that students do it justice. Time management in particular is crucial - the Section B essay mustn’t be rushed.

Arguably, Section B can be harder for students because they are unlikely to have covered the remaining specification (i.e. everything other than M&A) to the same degree and their research evidence for Section B might feel a bit “thinner”!

Question-spotting is never to be recommended. However, for Section B, I do feel that students might usefully focus on a smaller number of core topics which can be relatively easily linked together in a logical chain of argument, and for which relevant research is readily available.

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Revision Presentation - Government Intervention in Takeovers and Mergers

Thursday, June 14, 2012

This revision presentation outlines the reasons why governments might support or intervene in takeovers and mergers

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Takeovers and mergers: Wholesale Changes ahead for Booker & Makro

Wednesday, June 13, 2012

Here is a recent example of a classic horizontal integration.  Two UK wholesalers - Booker and Makro are being brought together in a £139.7m takeover. A good example to use to help illustrate the concept of horizontal integration, although it is far to early (obviously) to know whether the combination of these two businesses will deliver shareholder value to the investors in Booker, who will take control of their small rival.

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Takeovers and mergers: JD Sports and the Blacks Leisure Headache

Back in January 2012, the administrators of Blacks Leisure agreed to sell the remaining 300 stores to JD Sports for around £20million. Blacks Leisure was one of several high profile retail failures at the end of 2011, but JD Sports obviously saw some potential in the takeover. Five months later, it looks like the takeover might be proving to be less attractive than management first thought.

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Is shareholder value the only way to evaluate the success or failure of a takeover or merger?

It is a statistic that is widely supported by research and is also likely to be used by 000’s of students as they write about the likely success or failure of a takeover or merger:

“70% + of takeovers and mergers destroy value…”

In other words – most takeovers and mergers fail.  But is this the only way to measure success or failure?

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Takeovers and Mergers - the Language of M&A

Students writing essays about takeovers and mergers need to be familiar with some key terminology.  Here are some key terms which are worth understanding and using when writing about M&A:

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Takeovers and mergers: Every merger deal that has ever occurred (explained in fewer than 1000 words)

Thursday, June 07, 2012

With just two weeks to go before you wrestle with the BUSS4 paper no doubt you will be feeling somewhat saturated by the volume of information you are attempting to absorb as your revision peaks (or starts!)

It is my experience of this time of year that BUSS4 students run the risk of becoming so obsessed with remembering specific content (e.g. data & stats) that they neglect the context, and often very simple underlying principles, that explain the rationale behind business activity.  Understanding why businesses choose to merge is vitally important as it is their specific motives which drive the actions that they take and the decisions that they make.

Thus, if you can appreciate the motives behind a merger I believe you are halfway towards making sense of any question that section A throws your way on the day of the exam.  Understanding the reasons why businesses make the strategic choice to merge should be the starting point for any answer.  Crack this and you have a great chance of picking up the bulk of the marks. “It can’t be that easy I hear you say?”  The answer to your question is “yes it is” and I’m about to make it a whole lot easier!

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BUSS4 Example Essay - Integration Planning for Takeovers and Mergers

Saturday, May 26, 2012

We produced this sample essay to a exemplar BUSS4 essay on the importance of integration planning in determining the success of a takeover or merger. The essay title was:

“To what extent is integration planning the most important factor determining the success of a takeover or merger?”

The essay is provided below together with the marks and comments from an experienced AQA BUSS4 examiner

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BUSS4 - a clash of culture and a failed takeover

Friday, May 25, 2012

BUSS4 students really need to read this one - it offers good, strong evidence of the problems of takeovers and mergers including difficulties integrating businesses successfully. Last year Hewlett Packard bought Autonomy, a Cambridge software company, for $10bn. This year they have a 31% fall in profits and plan to cut 27,000 jobs (about 8% of their workforce) by end of 2014 in order to reduce costs by up to $3.5bn (£2.2bn) a year. As many business reports say, the move was part of a “productivity initiative designed to simplify business processes” and is down to their inability to keep up with products such as the iPad which eats into HP’s laptop sales.

HP haven’t announced where those staff cuts will be made yet, but a key news announcement yesterday was that Mike Lynch, who founded Autonomy and built it from a small start up founded with a loan of £2,000 from a man in a pub to the UK’s leading technology company, is to be replaced. HP seems to offer a classic case of Charles Handy’s Role culture with layers of bureaucracy which, critics say, has stifled the entrepreneurial spirit of Autonomy’s Power culture which focused on Mike Lynch who was used to making his own decisions and still based on a simple start-up structure. A BBC Business Correspondent reports that
“His drive and entrepreneurial flair was fundamental to the growth of the firm. Although many people found him difficult and demanding to work for, he was held in awe by rank-and-file staff. (compare Steve Jobs - similar comments are made about him.) That’s why Autonomy’s 300 Cambridge staff are worried about the future. One man, who declined to be identified, said: “Without Mike, we have a grim outlook. He was the reason many people work here. A brain drain of senior people is already under way.”

In that brain drain 20% of Autonomy’s staff have recently left including the President and Chief Finance Officer. The Independent reports on the culture clash saying that
“Autonomy hasn’t been performing the way the computer giant had hoped. HP wants big deals, sealed quickly, and the Autonomy style of working just hasn’t fitted in” - this article is really worth reading for its analysis of the problems in this takeover and others in which the entrepreneurial flair which brought small businesses to the attention of large ones has caused difficulties in achieving the business growth and synergies which were dreamed of.

Other useful resources on this story - a BBC video report examining the reasons for HP’s diffuculties and the management style at Autonomy, and a profile of Mike Lynch from The Telegraph. As Lord Sutch would say, business studies gold dust!

Did Ben & Jerry’s change Unilever?

Thursday, May 24, 2012

A fascinating story has appeared on the BBC News website featuring Jerry (of Ben & Jerry’s) as he explains the extent to which, after being taken over by Unliever in 2000, they have been able to bring their values to the vast conglomerate.

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6 Essential M&A Cases: Tata Group buys Jaguar Land Rover

Monday, May 21, 2012

The Tata acquisition of Jaguar Land Rover is a superb example to include in research notes on takeovers and mergers. At the time (early 2008), Tata’s investment in JLR seemed to be poorly timed and there were many critics who questioned the strategic logic of the move as well as its timing. Shortly after the takeover, demand in the global market for luxury cars collapsed as a result of the financial crisis and Tata was forced to refinance to support its investment.

Several years later, however, the takeover appears to be a compelling example of a successful acquisition which is generating substantial shareholder value for Tata as well as continued support from JLR’s many stakeholder groups in the UK.

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Who owns who?

Friday, May 18, 2012

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BUSS4 Exam Technique - Sniper or Machine Gunner?

Wednesday, May 16, 2012

One of the major difficulties with the BUSS4 paper is managing time effectively.  Students- understandably under pressure- regularly neglect to take the time to understand the question before they start writing.  They are unsure how best to address the essay and so try to reproduce their text book, hoping that some of their knowledge will hit the target.  Another error from those who have learned the syllabus, and/or built up a vast portfolio of information on the research theme, often feel obliged to ‘show off’ in the exam room.  Rather than scoring highly, however, their essays tend to read like a list of bullet points, interspersed with ‘stories’ about businesses they have studied.

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AQA BUSS4 - ‘with reference to *** plc and your own research ....’

Sunday, May 13, 2012

As you have doubtless been told numerous times, success in BUSS4 depends on having carried out your own research - this year, with a particular focus on mergers and acquisitions. Did you realise you cannot get a good grade in the first part WITHOUT explicitly using your research in your response?

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BUSS4 - Keep Calm and Carry On…

Preparing for the BUSS4 exam involves getting yourself right mentally.  Many students underestimate the influence that attitude has in determining how well they perform.  They focus on learning terminology and concepts and on building a research file but don’t spend enough time getting their psychological approach right. Here are some thoughts on how you can into the right frame of mind to do your best in BUSS4.

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Takeovers and Mergers - A Casino Gamble?

Saturday, May 12, 2012

Hot on the heels of the Vue takeover of Apollo Cinema Group, here is another significant takeover in the UK leisure sector. This one will certainly attract the attention of the competition regulators.  Two of the UK’s largest operators of casinos are being brought together as Rank buys Gala Coral’s casino business for £205m.

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Takeovers and Mergers - Vue on the Growth Trail!

News of a £20m takeover here which will be particularly relevant to colleagues and students who joined us recently for the BUSS4 revision workshops at cinemas around the UK…

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Takeovers and Mergers - one that went badly wrong (BMW and Rover)

Thursday, May 10, 2012

For the BUSS4 exam this June, it is useful to understand why a merger may fail to work and a retrospective look at BMW’s acquisition of Rover back in 1994 provides a good illustration of several possible pitfalls.

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Takeovers and Mergers - the failed takeover behind Clinton Cards’ Collapse

Wednesday, May 09, 2012

The collapse of Clinton Cards has been widely predicted for some time as its new CEO (recruited from Starbucks UK) attempted to achieve a turnaround and restructuring in recent months. Clinton’s administration is one of the biggest UK retail failures wince Woolworths and much of the press analysis will focus on the competitive pressures that the retail chain faced from online operators like Moonpig and Funky Pigeon, as well as the effect of weak consumer confidence and spending.

Eagle-eyed A2 students, however, will also spot that a strategic mistake back in 2004 is at the root of many of Clinton Cards problems. The mistake - buying Birthdays Group in 2004.

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AQA BUSS4 Section A Research Online Clinic - Tuesday 1 May 2012

Tuesday, May 01, 2012

This blog entry hosts an online revision clinic for students preparing for AQA BUSS4 Section A which will start at 9pm and last for an hour. Students who wish to get live support from the tutor2u team will be able to login to the clinic on this blog entry; please use your FB, Twitter or OpenID details to login.

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Vodafone and Cable and Wireless Worldwide

Wednesday, April 25, 2012

Cable and Wireless Worldwide has 20,500km of fibre-optic cables in the UK, owning this would mean that Vodafone doesn’t have develop a network from scratch, estimated at £5bn. Vodafone like other mobile operators needs additional capacity to cope with the increased use of smartphones - downloads of music, video, photos etc.

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Vodafone takes over Cable and Wireless Worldwide

Monday, April 23, 2012

Last week the share price of Cable and Wireless Worldwide C&WW, slumped, after the Indian conglomerate Tata withdrew its bid for the company.

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6 Essential M&A Cases: BA & Iberia Merge to Form IAG

This M&A briefing note provides an overview of the merger of British Airways and Iberia which led to the formation of a new firm - International Airlines Group (“IAG”)

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BUSS4: The Seven Point Scale for Perfect Paragraphs

Sunday, April 22, 2012

This is an idea I’ve developed following the recent tutor2u BUSS4 revision workshops for marking and feeding back to students when building essay skills. Like many of my A2 Business-teaching counterparts, I spent a large proportion of the Easter break marking BUSS4 mock essays. In a bid to help my students develop their paragraph writing skills, I made a note of the common areas for improvement and summarised them into seven key points for writing the ‘perfect’ paragraph:

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Easy ride for Audi?

Thursday, April 19, 2012

Cross border acquisitions allow a firm to reach new markets, or to add to their portfolios of brands. This morning’s business stories included Audi’s announcement that it has taken over the Italian Ducati Compnay.

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Takeovers and Mergers - Cost Synergies in Action at BMI

Tuesday, April 17, 2012

This is desperately bad news for the employees and local community involved, but it serves as a good example for students to understand the nature of cost synergies in a takeover or merger. This local newspaper report covers the announcement of hundreds of job losses at the headquarters of BMI, which has recently been acquired by British Airways from Lufthansa.

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Takeovers and Mergers: Facebook & Instagram in News Clips

Saturday, April 14, 2012

The Facebook takeover of Instagram for $1bn has generated a huge amount of media interest. The takeover is a great topical example for A2 business students looking at takeovers, and these video clips provide all they could possibly need in terms of looking at the motives for the deal and also the potential revenue synergies for Facebook.

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Strategy & Technological Change - Whatever Happened to BlackBerry?

The revenues achieved in 2011 by RIM, the owner of BlackBerry, fell by 25% compared with 2010. It looks like customers have fallen out of love with BlackBerry.  Apple, HTC, Samsung and other operator have grabbed a large share of BlackBerry’s customer base, so it must be that BlackBerry has seen its competitiveness deteriorate.

This excellent video from the FT examines some key strategic issues facing Rim and its BlackBerry brand. Could the business be a takeover target now that the firm is trying to achieve a turnaround? But, if so, who would want to buy it?  Can new product development save BlackBerry before it loses further market share in key markets like the US?  A fantastic lesson resource for A2 students…

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Instagram - the business with no revenues, worth $1bn

Monday, April 09, 2012

Simply stunning. There’s no other way to describe the takeover by Facebook of Instagram…for a cool $1bn. This takeover has really made the technology market sit up and notice.

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Revision Presentation - Emerging Markets

Saturday, April 07, 2012

This revision presentation provides an overview of the topic of emerging markets. It highlights some examples of how businesses have pursued a growth strategy in emerging markets and also how developed economies have seen investment coming in the opposite direction. A brief overview of the methods and benefits/drawbacks of international expansion is also provided.

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The Dawning Age of the Chinese Multinational

Chinese companies have historically been characterised as low-cost, low-quality producers of manufactured goods. However, there is growing evidence of a new breed of Chinese company emerging that is able to compete on the world stage.

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