WHY RESTRUCTURE – DETAIL19-7-13

Growth strategy models

• Ansoff’s product market matrix• BCG matrix• Grand strategy matrix• Industry/product life cycle analysis• Phillip Kotler

Growth

Intensive growth

Integrative growth

Diversification growth

BCG matrixfor portfolio rebalancing of multiple businesses companies

Relative market share High Medium Low

Indu

stry

sal

e gr

owth

rate

Low

Med

ium

H

igh

Grand strategy matrixfor single as well as multiple businesses companies

Rapid market growthW

eak

com

petit

ive

posi

tion

Strong c ompeti tive pos ition

Slow market growth

Industry/Product life cycle

• Introduction stage• Growth stage• Maturity stage• Decline stage

Other motives behind M&A

• Monopoly• Efficiency• Raider • Valuation• Empire building• Process• Disturbance

Friedrich Trautwein’s theories- why merge?

Merger as a rational choice Process outcome

Macroeconomic phenomenon

Merger benefits bidder’s shareholders

Benefits bidders managers

Monopoly: wealth trf (market share, market power, pricing power) from target customers

Empire building – create empires of managers rather than shareholders wealth

Process theory

Disturbance theory

Efficiency: adding to enterprise valuation through synergies

Raider: wealth trf from cash needy target’s shareholders to PE funds by valuing companies at much lower than intrinsic value

Valuation: net gains through private information that intrinsic value much higher than present market cap

Efficiency theory

1. Manufacturing synergy (revenue or cost saving)

2. Operations synergy (revenue or cost saving)

3. Marketing synergy (revenue or cost saving)

4. Financial synergy (cost saving)

5. Tax synergy (cost saving)