Summary: (2.1) Size Of A Business And Business Growth

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  • 1 (2.1) Size of a Business and Business Growth

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  • What financial aspect often causes mergers/takeovers to fail?

    • Huge financial costs are a primary issue.
    • Reliance on loan finance can lead to burdensome debt.
    • Debt can negatively impact a company after the deal.
  • Why might integrating systems be challenging in mergers/takeovers?

    • Companies may have different technology systems.
    • Integration can be expensive or impossible.
    • Example: Integration issues at eBay & Skype.
  • What is a merger and how does it differ from a takeover?

    • Merger: Combination of two separate businesses into a new one.
    • Takeover: One business takes control of another.
    • Mergers create a new entity; takeovers do not.
  • How does share price impact decisions in funding takeovers?

    • Companies might raise funds through equity issues.
    • This can negatively affect the share price.
    • Such impacts are critical to company performance.
  • What are some examples of cost savings in cost and revenue synergies?

    • Eliminate duplicated functions and services
    • Better deals from suppliers
    • Higher productivity and efficiency from shared assets
    • Economies of scale
  • What are examples of merged businesses and takeovers?

    • Merged Businesses:
      • Dixons Carphone
      • EE
    • Takeovers:
      • Microsoft & LinkedIn = Microsoft
  • What cultural factor can affect mergers or takeovers?

    • Clashing corporate cultures can cause issues.
    • Failures may arise from conflicts among key personalities.
    • Stakeholder value is often undermined by such clashes.
  • What is synergy and in what context is it associated?

    • Synergy is linked with external growth.
    • It occurs when the whole exceeds individual parts.
    • Related to takeovers, mergers, joint ventures, and strategic alliances.
  • What strategies can lead to higher sales in cost and revenue synergies?

    • Cross-selling to customers of both businesses
    • Access to new distribution
    • Brand extensions
    • New geographic markets opened up
  • What are methods of external growth in business?

    • Types include:
      • Merger
      • Takeover
      • Joint Venture
      • Strategic Alliance

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