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 6: Vertical M & As

Angelo Dringoli

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


In this chapter we examine the different types of vertical M & As and the conditions favouring these strategies. The analysis follows the lines already discussed in the previous chapter with particular focus on transaction costs as a relevant and specific factor of vertical M & As. After the analysis of advantages and drawbacks in vertical M & A, the conditions for a vertical M & A which creates value are defined through an analytical model. The analysis highlights that high transaction costs and efficiency in intermediate product markets are the most important external conditions for vertical M & As to create value. Conversely, capabilities in increasing efficiency by integrating processes and by exploiting asset and resource relationships result as being the most important internal factors for successful vertical M & As

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