askivy_assessment_center_case_study

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Point 2: Pros and Cons of an acquisitionA. List the pros. Below are some examples of pros for an acquisition, make sure you arefamiliar and understand all of them:o Economies of scale: this means that the combined entity can reduce its fixed costsby removing duplicate departments or operations, which increases profit margins.For example, if you combine two manufacturing companies, you can eliminate theduplicated production factories and only keep one, which will reduce costso Economies of scope: This means that you are able to sell more products withoutincreasing your cost base. For example, if a retail bank buys an insurancecompany, the bank can sell insurance services in its existing branches with noneed to open additional branches. Therefore, it will sell more products but have thesame costs as before, and this will increase marginso Other “synergies”. The word “synergy” describes the fact that two merged businessmay perform better than each business separately (the expression: “1 + 1 = 3” isoften used). For example, by being larger combined, you may have more powerover your suppliers and be able to reduce prices for your raw materialso Diversification: this is achieved by acquiring a target that sells product that thecompany does not sell currently, or acquiring a business that is in a country wherethe company is not present yet. Diversification is a good thing because it enablesthe company to be more stable because risk is less concentrated in one area. Forexample, if a specific country economy does not do well, this will be offset by othercountries that might do bettero Increasing market share: if you buy a competitor, you will increase your marketshare, and this will avoid price wars, which means you may be able to chargehigher prices and improve your marginso Improve management of the target firm: if the target is not well managed, valuemay be created by having a more successful management team in chargeB. Following is a sample list the cons of an acquisition:o The price paid may be too expensive and there may be a bidding war for the target.o Lack of synergies, or unpredictable synergieso Lack of diversificationo The target performance is uncertain and volatileo Poorly performing target due to bad products or reputationo The acquiring company does not have sufficient financial power to acquire thetarget (not big enough, not enough cash, already too much debt, etc.)10
o Extra points for mentioning: execution risk (the process of merging may encounterproblems) and regulatory issues such as monopoly regulations (the governmentmay oppose a merger because it thinks the combined entity will be too powerfuland dominate the market)11
Page 1 and 2: Case Study PracticeForInvestment Ba
Page 3 and 4: What are Case Studies?Case studies
Page 5 and 6: o Don’t use any fancy charts or c
Page 7 and 8: Step 2: Categorising and filling th
Page 9: Content and JargonFor such a presen
Page 13 and 14: There are 3 main ways to pay for a
Page 15 and 16: One important point to understand i
Page 17 and 18: Company 2: German TelekomBusiness D
Page 19 and 20: Company 4: MultiTelBusiness Descrip
Page 21 and 22: • Introduction: mention that you
Page 23 and 24: Strengths Weaknesses Opportunities
Page 25 and 26: Note: we have used the structure th
Page 27 and 28: • (execution risk): you can menti
Page 29 and 30: o The combination would create syne
Page 31 and 32: Company 1: Hellas MobilePros:• Ec
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