Merger and Acquisition Strategies

Merger and Acquisition Strategies

How to Create Value

New Perspectives on the Modern Corporation series

Angelo Dringoli

The decision to carry out a merger or acquisition is certainly a risky one, not least because of the number of variables influencing the final outcome. It is also a decision frequently based on the wrong objectives and an incorrect evaluation process. With this in mind, this important new book offers solutions for reducing the high percentage of mergers and acquisitions (M & As) that fail. It adopts a normative approach, using theoretical analysis to show what managers could and should do to increase shareholders’ value through successful M & A strategies. It also explores the conditions that are suitable for favouring a certain type of M & A (horizontal, vertical or diversified) over the others. In conclusion, the book presents case studies of successful M & A strategies providing a link between theory and practice.

Chapter 5: Horizontal M & As

Angelo Dringoli

Subjects: business and management, strategic management, economics and finance, industrial organisation


A horizontal M & A strategy is a course of action directed at increasing production capacity and sales, while continuing to produce the same basic product. The target firm can operate in the existing market of the acquiring firm or in different geographical markets as well as in markets characterized by different types and models of the same products. Horizontal M & As differ according to the objectives pursued and the different size of the capacity jumps. In this chapter we will analyse the conditions necessary for a horizontal M & A strategy to create value; the relevant variables are also analysed in their fundamental relations through a quantitative model, in order to offer a useful guide for decision making.

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