4. strategic approches to macr

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12/17/2010 4. Strategy and MACR 1

Alok KumarAlok Kumar


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12/17/20104. Strategy and MACR 2


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Is strategy a part of MACR? or

Is MACR a part of strategy?

How MACR and business strategy are inter-

connected?

How MACR fit in long-term strategy of a firm?

What is long-term strategy? (tactical vs. strategy)



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Product Life Cycle

Boston Consulting Group Matrix

Ansoff Matrix

Mckinsey Growth Matrix

Michael Porters forces Model

Michael Porters Competitive Advantage

Core Competence



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One of the most critical factor in M&A..



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Economic Motive Behind M&A Strategy

Growth

Synergy

Diversification

Non-Economic Motive Behind M&A Strategy

Hubris Hypothesis (Pride of Managers)

Winners Curse

Improved management



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If NPVM&A NPVnew project, - (New Project

If NPVM&A NPVnew project, - (M&A)

If NPVM&A = NPVnew project, - (Indifferent)



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The most important aspect in any M&A



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2+2 = 5

NAV = VAB [VA +VB] P E

Where,

NAV Net Acquisition Value

VAB the value of combine firm

VA the value of Firm A

VB the value of Firm B

P Premium paid for B

E Expenses of Acquisition



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Revenue Enhancement

Cost Reduction

Economy of Scale

Economy of Scope



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Cost of Capital

Capital Raising Capacity

Tax Benefits



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Too important to ignore



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Vertical Merger

Backward buy your supplier

Forward buy your buyer

Horizontal Merger buy your competitors

Conglomerate



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Never been successful so far..sad but true!



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Hubris Hypothesis arrogance and pride of management

and promoters

Winners Curse the management and promoters think

deal too important to lose it your competitors

Improved Management the acquirer management is

better than the of target.



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In the next class



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Alok Kumar



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12/17/2010 4. Strategy and MACR 25

Alok Kumar

Mind XpansionP

ortfolioP

rivate Ltd53/4477, RehgarPura

Karol Bagh, New Delhi-110005

E-Mail [email protected]

[email protected]

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