Mergers & Acquisitions from A to Z

By Andrew J. Sherman | Go to book overview

CHAPTER 13
Alternatives to Mergers and
Acquisitions

You will recall that in Chapter 1 we established that mergers and acquisitions, at least from the buyer’s perspective, were an inorganic growth strategy. The buyer’s acquisition plan identifies one or more transactions that will enhance its market share, create economies of scale, penetrate new geographic and categorical markets, and provide a basis for raising additional capital. Hopefully, at this point, you feel comfortable with the logistics, challenges, and mechanics of this strategy as well as the legal, financial, and strategic aspects of mergers and acquisitions.

However, there is a wide variety of alternative strategies that focus on the building of external relationships that achieve these same objectives. The primary difference among these strategies is the degree of control that results between the parties after the consummation of the relationship. If you take a look at Figure 13-1, you will see that mergers and acquisitions appears at the far left as being the growth strategy that results in the strongest level of control, since it doesn’t get much stronger than 100 percent ownership! As you move toward the right, you will see strategies such as joint ventures, franchising, licensing, strategic alliances, and distributorships. These are alternatives to mergers and acquisitions in that all of these strategies and relationships envision a dynamic and synergistic working relationship but fall short of a metamorphosis.

In 2008 and 2009, these strategic alternatives to M&A became more important than ever before, given the weakened economy with

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