4. Strategic Approches to MACR

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    12/17/2010 4. Strategy and MACR 1

    Alok KumarAlok Kumar

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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 alok.kumar@mindxpansion.in

    alok.kuma@gmail.com