Mergers, Acquisitions and Strategic Alliances

Summary

The video script explains the key concepts of mergers, acquisitions, and strategic alliances in the business world. Mergers combine two companies into a single entity, as seen in the Exxon and Mobil merger. Acquisitions involve one company taking control of another, exemplified by Walmart's acquisition of Flipkart. Strategic alliances are cooperative agreements between two firms to leverage mutual strengths, like Maruti Udyog Limited's alliance with Suzuki for cost-effective car production in India. These concepts are crucial for business growth and market expansion.

Takeaways

• 🔄 **Mergers** are the process where two companies combine to form a new entity, giving up their individual identities.
• 💡 **Example of Merger**: Exxon and Mobil merged to become ExxonMobil, illustrating the creation of a new company from two existing ones.
• 🛒 **Acquisition** is when one company buys a majority or all of another company's shares to gain control, typically over 51%.
• 🏬 **Acquisition Outcome**: Post-acquisition, the acquiring company, like Company A, becomes larger, and the acquired company, like Company B, becomes part of it.
• 🌏 **Real-Life Acquisition**: Walmart's acquisition of Flipkart in India is cited as a real-world example of an acquisition.
• 🤝 **Strategic Alliances** are cooperative agreements between two companies to work together in areas such as production, R&D, or marketing.
• 🔄 **Mutual Benefits**: Strategic alliances allow both companies to benefit from each other's strengths and resources.
• 🚗 **Joint Venture Example**: Maruti Udyog Limited from India and Suzuki from Japan formed a strategic alliance to manufacture cost-effective and efficient cars for the Indian market.
• 💼 **Alliances in Business**: Strategic alliances can also be seen as joint ventures, where two companies come together to create a new entity, like 'Company A B'.
• 📈 **Business Growth**: Mergers, acquisitions, and strategic alliances are business strategies aimed at growth, market expansion, and leveraging combined strengths.

Q & A

What is a merger?

A merger is the process where two existing companies unite to form a new company, giving up their individual identities. For example, Exxon and Mobil united to become ExxonMobil.

How does a merger differ from an acquisition?

In a merger, two companies combine to create a new entity, whereas an acquisition involves one company purchasing a majority or all of another company's shares to gain control, with the acquired company becoming part of the acquiring company.

Can you provide an example of a merger in real life?

Exxon and Mobil's union to form ExxonMobil is a real-life example of a merger.

What is an acquisition?

An acquisition is when one company purchases at least 51 percent or all of another company's shares, thereby gaining control over the acquired company.

Can you give a real-world example of an acquisition?

Walmart's acquisition of Flipkart in India is a real-world example of an acquisition where Walmart gained control over Flipkart.

What is a strategic alliance?

A strategic alliance is an arrangement between two companies to cooperate in areas such as production, research and development, or marketing, benefiting both companies mutually.

How does a strategic alliance benefit the companies involved?

Strategic alliances allow companies to utilize each other's strengths to manufacture products, conduct research, or provide services more effectively and efficiently.

Can you provide an example of a strategic alliance?

Maruti Udyog Limited, an Indian company, struck a strategic alliance with Suzuki based in Japan to manufacture cost-effective and efficient cars for the Indian market.

Is a joint venture the same as a strategic alliance?

A joint venture is a type of strategic alliance where two companies come together to create a new entity to pursue a specific business project or venture.

What are the key differences between mergers, acquisitions, and strategic alliances?

Mergers involve the combination of two companies into a new entity, acquisitions are about one company gaining control over another, and strategic alliances are cooperative agreements without the loss of individual company identities.

Why would companies choose to enter into a merger, acquisition, or strategic alliance?

Companies may choose these strategies to expand market share, gain access to new technologies or markets, increase efficiency, or achieve other strategic objectives.