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110-763: The organisation was formed in January 2020 as Asthma UK and the British Lung Foundation Partnership as a result of a merger between Asthma UK and the British Lung Foundation. On 24 February 2022, the charity announced that the organisation had been renamed to Asthma and Lung UK . Asthma UK was initially founded in 1927, under the name of the Asthma Research Council. The first donation was used to pay for special asthma clinics at Guy's Hospital and Great Ormond Street Hospital . In 1989,

220-401: A merger is the legal consolidation of two business entities into one, whereas an acquisition occurs when one entity takes ownership of another entity's share capital , equity interests or assets . From a legal and financial point of view, both mergers and acquisitions generally result in the consolidation of assets and liabilities under one entity, and the distinction between the two

330-404: A feedback loop to monitor execution and to inform the next round of planning. Michael Porter identifies three principles underlying strategy: Corporate strategy involves answering a key question from a portfolio perspective: "What business should we be in?" Business strategy involves answering the question: "How shall we compete in this business?" Alternatively, corporate strategy

440-568: A 1954 book The Practice of Management writing: "... the first responsibility of top management is to ask the question 'what is our business?' and to make sure it is carefully studied and correctly answered." He wrote that the answer was determined by the customer. He recommended eight areas where objectives should be set, such as market standing, innovation, productivity, physical and financial resources, worker performance and attitude, profitability, manager performance and development, and public responsibility. In 1957, Philip Selznick initially used

550-405: A business retain just a handful of key players that would have otherwise left. Organizations should move rapidly to re-recruit key managers. It's much easier to succeed with a team of quality players that one selects deliberately rather than try to win a game with those who randomly show up to play. Mergers and acquisitions often create brand problems, beginning with what to call the company after

660-555: A business, which accrues to both categories of stakeholders, is called the Enterprise Value (EV), whereas the value which accrues just to shareholders is the Equity Value (also called market capitalization for publicly listed companies). Enterprise Value reflects a capital structure neutral valuation and is frequently a preferred way to compare value as it is not affected by a company's, or management's, strategic decision to fund

770-486: A certain size. An acquisition/takeover is the purchase of one business or company by another company or other business entity. Specific acquisition targets can be identified through myriad avenues, including market research, trade expos, sent up from internal business units, or supply chain analysis. Such purchase may be of 100%, or nearly 100%, of the assets or ownership equity of the acquired entity. A consolidation/amalgamation occurs when two companies combine to form

880-416: A company must only choose one of the three or risk that the business would waste precious resources. Porter's generic strategies detail the interaction between cost minimization strategies, product differentiation strategies, and market focus strategies. Porter described an industry as having multiple segments that can be targeted by a firm. The breadth of its targeting refers to the competitive scope of

990-402: A framework for analyzing the profitability of industries and how those profits are divided among the participants in 1980. In five forces analysis he identified the forces that shape the industry structure or environment. The framework involves the bargaining power of buyers and suppliers, the threat of new entrants, the availability of substitute products, and the competitive rivalry of firms in

1100-473: A function of their acquisition activity. Therefore, additional motives for merger and acquisition that may not add shareholder value include: The M&A process itself is a multifaceted which depends upon the type of merging companies. The M&A process results in the restructuring of a business's purpose, corporate governance and brand identity. An arm's length merger is a merger: ″The two elements are complementary and not substitutes. The first element

1210-433: A larger and/or longer-established company and retain the name of the latter for the post-acquisition combined entity. This is known as a reverse takeover . Another type of acquisition is the reverse merger , a form of transaction that enables a private company to be publicly listed in a relatively short time frame. A reverse merger is a type of merger where a privately held company, typically one with promising prospects and

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1320-436: A long-term coordinated strategy was necessary to give a company structure, direction and focus. He says it concisely, "structure follows strategy." Chandler wrote that: " Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals ." Igor Ansoff built on Chandler's work by adding concepts and inventing

1430-426: A merger or acquisition transaction can range from political to tactical. Ego can drive choice just as well as rational factors such as brand value and costs involved with changing brands. Beyond the bigger issue of what to call the company after the transaction comes the ongoing detailed choices about what divisional, product and service brands to keep. The detailed decisions about the brand portfolio are covered under

1540-444: A need for financing, acquires a publicly listed shell company that has few assets and no significant business operations. The combined evidence suggests that the shareholders of acquired firms realize significant positive "abnormal returns," while shareholders of the acquiring company are most likely to experience a negative wealth effect. Most studies indicate that M&A transactions have a positive net effect, with investors in both

1650-433: A new enterprise altogether, and neither of the previous companies remains independently owned. Acquisitions are divided into "private" and "public" acquisitions, depending on whether the acquiree or merging company (also termed a target ) is or is not publicly listed. Some public companies rely on acquisitions as an important value creation strategy. An additional dimension or categorization consists of whether an acquisition

1760-604: A regular participant in the Scottish Parliament 's Cross-Party Group on Lung Health since its inception in 2021. The British Lung Foundation helped found the Taskforce for Lung Health in 2018, which brought together representatives from over 40 organisations in the sector to make recommendations on how to improve care for lung disease in the UK. In 2020, the taskforce revealed that lung patients’ symptoms had improved during lockdown as

1870-484: A result of a drop in air pollution. However in 2021, it warned that one fifth of lung disease patients had to wait more than a year for a prognosis, and risked dying before they were even diagnosed. In 2023, Asthma + Lung UK published research which suggested up to 750,000 people in England were being misdiagnosed with asthma, due to a lack of simple tests for common lung conditions. The research claimed these misdiagnoses cost

1980-601: A search for sources of competitive advantage. By the 1960s, the capstone business policy course at the Harvard Business School included the concept of matching the distinctive competence of a company (its internal strengths and weaknesses) with its environment (external opportunities and threats) in the context of its objectives. This framework came to be known by the acronym SWOT and was "a major step forward in bringing explicitly competitive thinking to bear on questions of strategy". Kenneth R. Andrews helped popularize

2090-448: A series of strategic decisions about how the organization will compete. Formulation ends with a series of goals or objectives and measures for the organization to pursue. Environmental analysis includes the: Strategic decisions are based on insight from the environmental assessment and are responses to strategic questions about how the organization will compete, such as: The answers to these and many other strategic questions result in

2200-486: A shift from the production focus to market focus. The prevailing concept in strategy up to the 1950s was to create a product of high technical quality. If you created a product that worked well and was durable, it was assumed you would have no difficulty profiting. This was called the production orientation . Henry Ford famously said of the Model T car: "Any customer can have a car painted any color that he wants, so long as it

2310-434: A situation where one company splits into two, generating a second company which may or may not become separately listed on a stock exchange. As per knowledge-based views, firms can generate greater values through the retention of knowledge-based resources which they generate and integrate. Extracting technological benefits during and after acquisition is an ever-challenging issue because of organizational differences. Based on

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2420-550: A special committee of independent directors; and 2) conditioned on an affirmative vote of a majority of the minority stockholders, the business judgment standard of review should presumptively apply, and any plaintiff ought to have to plead particularized facts that, if true, support an inference that, despite the facially fair process, the merger was tainted because of fiduciary wrongdoing.″ A Strategic merger usually refers to long-term strategic holding of target (Acquired) firm. This type of M&A process aims at creating synergies in

2530-468: A total value of US$ 2,164.4 bil. Some of the largest mergers of equals took place during the dot-com bubble of the late 1990s and in the year 2000: AOL and Time Warner (US$ 164 bil.), SmithKline Beecham and Glaxo Wellcome (US$ 75 bil.), Citicorp and Travelers Group (US$ 72 bil.). More recent examples this type of combinations are DuPont and Dow Chemical (US$ 62 bil.) and Praxair and Linde (US$ 35 bil.). An analysis of 1,600 companies across industries revealed

2640-472: A valuable product or service for the market. These include functions such as inbound logistics, operations, outbound logistics, marketing and sales, and service, supported by systems and technology infrastructure. By aligning the various activities in its value chain with the organization's strategy in a coherent way, a firm can achieve a competitive advantage. Porter also wrote that strategy is an internally consistent configuration of activities that differentiates

2750-445: A variety of factors, such as the learning curve , substitution of labor for capital (automation), and technological sophistication. Author Walter Kiechel wrote that it reflected several insights, including: Kiechel wrote in 2010: "The experience curve was, simply, the most important concept in launching the strategy revolution...with the experience curve, the strategy revolution began to insinuate an acute awareness of competition into

2860-536: A vocabulary. He developed a grid that compared strategies for market penetration, product development, market development and horizontal and vertical integration and diversification. He felt that management could use the grid to systematically prepare for the future. In his 1965 classic Corporate Strategy , he developed gap analysis to clarify the gap between the current reality and the goals and to develop what he called "gap reducing actions". Ansoff wrote that strategic management had three parts: strategic planning ;

2970-456: Is friendly or hostile . Achieving acquisition success has proven to be very difficult, while various studies have shown that 50% of acquisitions were unsuccessful. "Serial acquirers" appear to be more successful with M&A than companies who make acquisitions only occasionally (see Douma & Schreuder, 2013, chapter 13). The new forms of buy out created since the crisis are based on serial type acquisitions known as an ECO Buyout which

3080-474: Is a co-community ownership buy out and the new generation buy outs of the MIBO (Management Involved or Management & Institution Buy Out) and MEIBO (Management & Employee Involved Buy Out). Whether a purchase is perceived as being "friendly" or "hostile" depends significantly on how the proposed acquisition is communicated to and perceived by the target company's board of directors, employees, and shareholders. It

3190-426: Is a triangular merger, where the target company merges with a shell company wholly owned by the buyer, thus becoming a subsidiary of the buyer. In a "forward triangular merger ", the target company merges into the subsidiary, with the subsidiary as the surviving company of the merger; a "reverse triangular merger" is similar except that the subsidiary merges into the target company, with the target company surviving

3300-525: Is also used in relation to marketing , where the variable "importance" is related to buyers' perception of important attributes of a product: for attributes which might be considered important to buyers, both their perceived importance and their performance are assessed. The concept of the corporation as a portfolio of business units, with each plotted graphically based on its market share (a measure of its competitive position relative to its peers) and industry growth rate (a measure of industry attractiveness),

3410-425: Is between two competitors in the same industry. A vertical merger occurs when two firms combine across the value chain, such as when a firm buys a former supplier (backward integration) or a former customer (forward integration). When there is no strategic relatedness between an acquiring firm and its target, this is called a conglomerate merger (Douma & Schreuder, 2013). The form of merger most often employed

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3520-454: Is black." Management theorist Peter F Drucker wrote in 1954 that it was the customer who defined what business the organization was in. In 1960 Theodore Levitt argued that instead of producing products then trying to sell them to the customer, businesses should start with the customer, find out what they wanted, and then produce it for them. The fallacy of the production orientation was also referred to as marketing myopia in an article of

3630-399: Is combined into another entity by operation of the corporate law statute(s) of the jurisdiction of the merging entities. In a transaction structured as a merger or an equity purchase, the buyer acquires all of the assets and liabilities of the acquired entity. In a transaction structured as an asset purchase, the buyer and seller agree on which assets and liabilities the buyer will acquire from

3740-425: Is complete, the parties may proceed to draw up a definitive agreement, known as a "merger agreement", "share purchase agreement," or "asset purchase agreement" depending on the structure of the transaction. Such contracts are typically 80 to 100 pages long and focus on five key types of terms: Following the closing of a deal, adjustments may be made to some of the provisions outlined in the purchase agreement, such as

3850-426: Is important because the directors have the capability to act as effective and active bargaining agents, which disaggregated stockholders do not. But, because bargaining agents are not always effective or faithful, the second element is critical, because it gives the minority stockholders the opportunity to reject their agents' work. Therefore, when a merger with a controlling stockholder was: 1) negotiated and approved by

3960-412: Is normal for M&A deal communications to take place in a so-called "confidentiality bubble," wherein the flow of information is restricted pursuant to confidentiality agreements. In the case of a friendly transaction, the companies cooperate in negotiations; in the case of a hostile deal, the board and/or management of the target is unwilling to be bought or the target's board has no prior knowledge of

4070-481: Is normative. It consists of the schools of informal design and conception, the formal planning, and analytical positioning. The second group, consisting of six schools, is more concerned with how strategic management is actually done, rather than prescribing optimal plans or positions. The six schools are entrepreneurial, visionary, cognitive, learning/adaptive/emergent, negotiation, corporate culture and business environment. The third and final group consists of one school,

4180-702: Is not always clear. Most countries require mergers and acquisitions to comply with antitrust or competition law . In the United States , for example, the Clayton Act outlaws any merger or acquisition that may "substantially lessen competition" or "tend to create a monopoly ", and the Hart–Scott–Rodino Act requires notifying the U.S. Department of Justice 's Antitrust Division and the Federal Trade Commission about any merger or acquisition over

4290-415: Is possible only when resources are exchanged and managed without affecting their independence. A corporate acquisition can be structured legally as either an "asset purchase" in which the seller sells business assets and liabilities to the buyer, an "equity purchase" in which the buyer purchases equity interests in a target company from one or more selling shareholders or a "merger" in which one legal entity

4400-460: Is provided by full-service investment banks- who often advise and handle the biggest deals in the world (called bulge bracket ) - and specialist M&A firms, who provide M&A only advisory, generally to mid-market, select industries and SBEs. Highly focused and specialized M&A advice investment banks are called boutique investment banks . The dominant rationale used to explain M&;A activity

4510-409: Is strategic management of a corporation (a particular legal structure of a business); business strategy is the strategic management of a business . Management theory and practice often make a distinction between strategic management and operational management , where operational management is concerned primarily with improving efficiency and controlling costs within the boundaries set by

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4620-430: Is striving and the means (policies) by which it is seeking to get there." He continued that: "The essence of formulating competitive strategy is relating a company to its environment." Some complexity theorists define strategy as the unfolding of the internal and external aspects of the organization that results in actions in a socio-economic context. Michael D. Watkins claimed in 2007 that if mission/goals answer

4730-487: Is that acquiring firms seek improved financial performance or reduce risk. The following motives are considered to improve financial performance or reduce risk: Megadeals—deals of at least one $ 1 billion in size—tend to fall into four discrete categories: consolidation, capabilities extension, technology-driven market transformation, and going private. On average and across the most commonly studied variables, acquiring firms' financial performance does not positively change as

4840-521: The Hudson's Bay Company merged with the rival North West Company . The Great Merger Movement was a predominantly U.S. business phenomenon that happened from 1895 to 1905. During this time, small firms with little market share consolidated with similar firms to form large, powerful institutions that dominated their markets, such as the Standard Oil Company , which at its height controlled nearly 90% of

4950-427: The experience curve . Companies that pursued the highest market share position to achieve cost advantages fit under Porter's cost leadership generic strategy, but the concept of choice regarding differentiation and focus represented a new perspective. Porter's 1985 description of the value chain refers to the chain of activities (processes or collections of processes) that an organization performs in order to deliver

5060-485: The 'what' question, or if vision answers the 'why' questions, then strategy provides answers to the 'how' question of business management. The strategic management discipline originated in the 1950s and 1960s. Among the numerous early contributors, the most influential were Peter Drucker , Philip Selznick , Alfred Chandler, Igor Ansoff , and Bruce Henderson. The discipline draws from earlier thinking and texts on ' strategy ' dating back thousands of years. Prior to 1960,

5170-518: The Corporate Level 2014 In 1980, Porter defined the two types of competitive advantage an organization can achieve relative to its rivals: lower cost or differentiation . This advantage derives from attribute(s) that allow an organization to outperform its competition, such as superior market position, skills, or resources. In Porter's view, strategic management should be concerned with building and sustaining competitive advantage. Porter developed

5280-522: The Council became the National Asthma Campaign, and in 2004, it changed its name to Asthma UK. Meanwhile, the British Lung Foundation was established by Professor Sir Malcolm Green and a group of British lung specialists in 1984. In December 2019, Asthma UK and the British Lung Foundation announced that they had agreed to merge, to form Asthma UK and the British Lung Foundation Partnership. It

5390-791: The Great Merger Movement were able to keep their dominance in their respective sectors through 1929, and in some cases today, due to growing technological advances of their products, patents , and brand recognition by their customers. There were also other companies that held the greatest market share in 1905 but at the same time did not have the competitive advantages of the companies like DuPont and General Electric . These companies such as International Paper and American Chicle saw their market share decrease significantly by 1929 as smaller competitors joined forces with each other and provided much more competition. The companies that merged were mass producers of homogeneous goods that could exploit

5500-486: The Great Merger Movement. Strategic management In the field of management , strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization 's managers on behalf of stakeholders, based on consideration of resources and an assessment of the internal and external environments in which the organization operates. Strategic management provides overall direction to an enterprise and involves specifying

5610-450: The acquiring company's stock, issued to the shareholders of the acquired company at a given ratio proportional to the valuation of the latter. They receive stock in the company that is purchasing the smaller subsidiary. There are some elements to think about when choosing the form of payment. When submitting an offer, the acquiring firm should consider other potential bidders and think strategically. The form of payment might be decisive for

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5720-512: The acquisition so the team can focus on projects for their new employer). In recent years, these types of acquisitions have become common in the technology industry, where major web companies such as Facebook , Twitter , and Yahoo! have frequently used talent acquisitions to add expertise in particular areas to their workforces. Merger of equals is often a combination of companies of a similar size. Since 1990, there have been more than 625 M&A transactions announced as mergers of equals with

5830-455: The argument for achieving higher market share and economies of scale . Porter wrote in 1980 that companies have to make choices about their scope and the type of competitive advantage they seek to achieve, whether lower cost or differentiation. The idea of strategy targeting particular industries and customers (i.e., competitive positions) with a differentiated offering was a departure from the experience-curve influenced strategy paradigm, which

5940-514: The assets and liabilities that pertain solely to the unit being sold, determining whether the unit relies on services from other parts of the seller's organization, transferring employees, moving permits and licenses, and safeguarding against potential competition from the seller in the same business sector after the transaction is completed. From an economic point of view, business combinations can also be classified as horizontal, vertical and conglomerate mergers (or acquisitions). A horizontal merger

6050-446: The business either through debt, equity, or a portion of both. Five common ways to "triangulate" the enterprise value of a business are: Professionals who value businesses generally do not use just one method, but a combination. Valuations implied using these methodologies can prove different to a company's current trading valuation. For public companies, the market based enterprise value and equity value can be calculated by referring to

6160-536: The business. Porter defined two types of competitive advantage : lower cost or differentiation relative to its rivals. Achieving competitive advantage results from a firm's ability to cope with the five forces better than its rivals. Porter wrote: "[A]chieving competitive advantage requires a firm to make a choice...about the type of competitive advantage it seeks to attain and the scope within which it will attain it." He also wrote: "The two basic types of competitive advantage [differentiation and lower cost] combined with

6270-482: The buyer and target companies seeing positive returns. This suggests that M&A creates economic value, likely by transferring assets to more efficient management teams who can better utilize them. (See Douma & Schreuder, 2013, chapter 13). There are also a variety of structures used in securing control over the assets of a company, which have different tax and regulatory implications: The terms " demerger ", " spin-off " and "spin-out" are sometimes used to indicate

6380-469: The buyer. Hence, the analysis should be done from the acquiring firm's point of view. Synergy-creating investments are started by the choice of the acquirer, and therefore they are not obligatory, making them essentially real options . To include this real options aspect into analysis of acquisition targets is one interesting issue that has been studied lately. See also contingent value rights . Mergers are generally differentiated from acquisitions partly by

6490-422: The charity announced that the organisation had been renamed to Asthma and Lung UK, styled as Asthma + Lung UK. Asthma + Lung UK appointed Sarah Sleet as its new chief executive officer in January 2024. She replaced Sarah Woolnough, who had been in post for the previous three years. Asthma + Lung UK – and its previous incarnations – is known for the research it has been carrying out into asthma and lung disease for

6600-462: The company's current account), liquidity ratios might decrease. On the other hand, in a pure stock for stock transaction (financed from the issuance of new shares), the company might show lower profitability ratios (e.g. ROA). However, economic dilution must prevail towards accounting dilution when making the choice. The form of payment and financing options are tightly linked. If the buyer pays cash, there are three main financing options: M&A advice

6710-469: The company's share price and components on its balance sheet. The valuation methods described above represent ways to determine value of a company independently from how the market currently, or historically, has determined value based on the price of its outstanding securities. Most often value is expressed in a Letter of Opinion of Value (LOV) when the business is being valued informally. Formal valuation reports generally get more detailed and expensive as

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6820-597: The concept of "parenting advantage" to be applied at the corporate level, as a parallel to the concept of "competitive advantage" applied at the business level. Parent companies, they argued, should aim to "add more value" to their portfolio of businesses than rivals. If they succeed, they have a parenting advantage. The right level of diversification depends, therefore, on the ability of the parent company to add value in comparison to others. Different parent companies with different skills should expect to have different portfolios. See Corporate Level Strategy 1995 and Strategy for

6930-399: The configuration or transformation school, a hybrid of the other schools organized into stages, organizational life cycles, or "episodes". Michael Porter defined strategy in 1980 as the "...broad formula for how a business is going to compete, what its goals should be, and what policies will be needed to carry out those goals" and the "...combination of the ends (goals) for which the firm

7040-420: The content analysis of seven interviews, the authors concluded the following components for their grounded model of acquisition: An increase in acquisitions in the global business environment requires enterprises to evaluate the key stake holders of acquisitions very carefully before implementation. It is imperative for the acquirer to understand this relationship and apply it to its advantage. Employee retention

7150-430: The control of the buyer modified. If the issuance of shares is necessary, shareholders of the acquiring company might prevent such capital increase at the general meeting of shareholders. The risk is removed with a cash transaction. Then, the balance sheet of the buyer will be modified and the decision maker should take into account the effects on the reported financial results. For example, in a pure cash deal (financed from

7260-452: The corporate consciousness." Prior to the 1960s, the word competition rarely appeared in the most prominent management literature; U.S. companies then faced considerably less competition and did not focus on performance relative to peers. Further, the experience curve provided a basis for the retail sale of business ideas, helping drive the management consulting industry. Completion of an importance-performance matrix forms "a crucial stage in

7370-442: The day-to-day operations of the business is often referred to as "operations management" or specific terms for key departments or functions, such as "logistics management" or " marketing management ," which take over once strategic management decisions are implemented. Strategy has been practiced whenever an advantage was gained by planning the sequence and timing of the deployment of resources while simultaneously taking into account

7480-405: The efficiencies of large volume production. In addition, many of these mergers were capital-intensive. Due to high fixed costs, when demand fell, these newly merged companies had an incentive to maintain output and reduce prices. However more often than not mergers were "quick mergers". These "quick mergers" involved mergers of companies with unrelated technology and different management. As a result,

7590-468: The efficiency gains associated with mergers were not present. The new and bigger company would actually face higher costs than competitors because of these technological and managerial differences. Thus, the mergers were not done to see large efficiency gains, they were in fact done because that was the trend at the time. Companies which had specific fine products, like fine writing paper, earned their profits on high margin rather than volume and took no part in

7700-510: The formulation of operations strategy", and may be considered a "simple, yet useful, method for simultaneously considering both the importance and performance dimensions when evaluating or defining strategy". Notes on this subject from the Department of Engineering at the University of Cambridge suggest that a binary matrix may be used "but may be found too crude", and nine point scales on both

7810-489: The framework via a 1963 conference and it remains commonly used in practice. The experience curve was developed by the Boston Consulting Group in 1966. It reflects a hypothesis that total per unit costs decline systematically by as much as 15–25% every time cumulative production (i.e., "experience") doubles. It has been empirically confirmed by some firms at various points in their history. Costs decline due to

7920-473: The global oil refinery industry. It is estimated that more than 1,800 of these firms disappeared into consolidations, many of which acquired substantial shares of the markets in which they operated. The vehicle used were so-called trusts . In 1900 the value of firms acquired in mergers was 20% of GDP . In 1990 the value was only 3% and from 1998 to 2000 it was around 10–11% of GDP. Companies such as DuPont , U.S. Steel , and General Electric that merged during

8030-593: The government an estimated £132 million each year. Research published by the charity in 2024 showed that while deaths from asthma attacks were up by a quarter since 2010, two thirds of asthma deaths were preventable. In 2021-22, Asthma + Lung UK generated £13.9 million. Of this amount, £5.1m came from legacies (37%), £4.3m from donations (31%), £1.4m from fundraising (10%), £1.3m from grants (9%), £0.5m from gifts in kind (4%), and £0.4m from its investment portfolio (3%). Mergers and acquisitions Mergers and acquisitions ( M&A ) are business transactions in which

8140-440: The importance and performance axes are recommended. An importance scale could be labelled from "the main thrust of competitiveness" to "never considered by customers and never likely to do so", and performance can be segmented into "better than", "the same as", and "worse than" the company's competitors. The highest urgency would than be directed to the most important areas where performance is poorer than competitors. The technique

8250-448: The industry. These forces affect the organization's ability to raise its prices as well as the costs of inputs (such as raw materials) for its processes. The five forces framework helps describe how a firm can use these forces to obtain a sustainable competitive advantage , either lower cost or differentiation. Companies can maximize their profitability by competing in industries with favorable structure. Competitors can take steps to grow

8360-512: The issue of the appropriate level of diversification . In 1987, he argued that corporate strategy involves two questions: 1) What business should the corporation be in? and 2) How should the corporate office manage its business units? He mentioned four concepts of corporate strategy each of which suggest a certain type of portfolio and a certain role for the corporate office; the latter three can be used together: Building on Porter's ideas, Michael Goold, Andrew Campbell and Marcus Alexander developed

8470-437: The key dimensions considered (industry attractiveness and competitive position) remain central to strategy. In response to the evident problems of "over diversification", C. K. Prahalad and Gary Hamel suggested that companies should build portfolios of businesses around shared technical or operating competencies, and should develop structures and processes to enhance their core competencies . Michael Porter also addressed

8580-440: The long run by increased market share, broad customer base, and corporate strength of business. A strategic acquirer may also be willing to pay a premium offer to target firm in the outlook of the synergy value created after M&A process. The term "acqui-hire" is used to refer to acquisitions where the acquiring company seeks to obtain the target company's talent, rather than their products (which are often discontinued as part of

8690-697: The main elements of strategic management theory where consensus generally existed as of the 1970s, writing that strategic management: Chaffee further wrote that research up to that point covered three models of strategy, which were not mutually exclusive: The progress of strategy since 1960 can be charted by a variety of frameworks and concepts introduced by management consultants and academics. These reflect an increased focus on cost, competition and customers. These "3 Cs" were illuminated by much more robust empirical analysis at ever-more granular levels of detail, as industries and organizations were disaggregated into business units, activities, processes, and individuals in

8800-440: The merger. Mergers, asset purchases and equity purchases are each taxed differently, and the most beneficial structure for tax purposes is highly situation-dependent. Under the U.S. Internal Revenue Code , a forward triangular merger is taxed as if the target company sold its assets to the shell company and then liquidated, them whereas a reverse triangular merger is taxed as if the target company's shareholders sold their stock in

8910-429: The most value from a business assessment, objectives should be clearly defined and the right resources should be chosen to conduct the assessment in the available timeframe. As synergy plays a large role in the valuation of acquisitions, it is paramount to get the value of synergies right; as briefly alluded to re DCF valuations. Synergies are different from the "sales price" valuation of the firm, as they will accrue to

9020-417: The offer. Hostile acquisitions can, and often do, ultimately become "friendly" as the acquirer secures endorsement of the transaction from the board of the acquiree company. This usually requires an improvement in the terms of the offer and/or through negotiation. "Acquisition" usually refers to a purchase of a smaller firm by a larger one. Sometimes, however, a smaller firm will acquire management control of

9130-478: The opportunities and threats in the business environment. Alfred Chandler recognized the importance of coordinating management activity under an all-encompassing strategy. Interactions between functions were typically handled by managers who relayed information back and forth between departments. Chandler stressed the importance of taking a long-term perspective when looking to the future. In his 1962 ground breaking work Strategy and Structure , Chandler showed that

9240-404: The organization's objectives , developing policies and plans to achieve those objectives, and then allocating resources to implement the plans. Academics and practicing managers have developed numerous models and frameworks to assist in strategic decision-making in the context of complex environments and competitive dynamics. Strategic management is not static in nature; the models can include

9350-431: The organization's strategy . Strategy is defined as "the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals." Strategies are established to set direction, focus effort, define or clarify the organization, and provide consistency or guidance in response to the environment. Strategic management involves

9460-615: The organization's strategy and a series of specific short-term and long-term goals or objectives and related measures. The second major process of strategic management is implementation , which involves decisions regarding how the organization's resources (i.e., people, process and IT systems) will be aligned and mobilized towards the objectives. Implementation results in how the organization's resources are structured (such as by product or service or geography), leadership arrangements, communication, incentives, and monitoring mechanisms to track progress towards objectives, among others. Running

9570-538: The overall profitability of the industry, or to take profit away from other parts of the industry structure. Porter modified Chandler's dictum about structure following strategy by introducing a second level of structure: while organizational structure follows strategy, it in turn follows industry structure. Porter wrote in 1980 that strategy target either cost leadership , differentiation , or focus. These are known as Porter's three generic strategies and can be applied to any size or form of business. Porter claimed that

9680-431: The ownership of companies , business organizations , or their operating units are transferred to or consolidated with another company or business organization. This could happen through direct absorption, a merger, a tender offer or a hostile takeover. As an aspect of strategic management , M&A can allow enterprises to grow or downsize , and change the nature of their business or competitive position. Technically,

9790-539: The past decades. It has informed a number of parliamentary debates on the issue. Since 2012, Asthma UK has conducted an annual survey of people with asthma , looking into their experience of living with the condition and the care they receive. The survey has been taken over and continued by Asthma + Lung UK since the merger with the British Lung Foundation. In 2014, Asthma UK founded the Centre for Applied Research in asthma at University of Edinburgh . The Centre has been

9900-666: The probable capabilities and behavior of competition. Bruce Henderson In 1988, Henry Mintzberg described the many different definitions and perspectives on strategy reflected in both academic research and in practice. He examined the strategic process and concluded it was much more fluid and unpredictable than people had thought. Because of this, he could not point to one process that could be called strategic planning . Instead Mintzberg concludes that there are five types of strategies: In 1998, Mintzberg developed these five types of management strategy into 10 "schools of thought" and grouped them into three categories. The first group

10010-446: The purchase price. These adjustments are subject to enforceability issues in certain situations. Alternatively, certain transactions use the 'locked box' approach, where the purchase price is fixed at signing and based on the seller's equity value at a pre-signing date and an interest charge. The assets of a business are pledged to two categories of stakeholders: equity owners and owners of the business' outstanding debt. The core value of

10120-436: The related concepts of strategic planning and strategic thinking . Strategic planning is analytical in nature and refers to formalized procedures to produce the data and analyses used as inputs for strategic thinking, which synthesizes the data resulting in the strategy. Strategic planning may also refer to control mechanisms used to implement the strategy once it is determined. In other words, strategic planning happens around

10230-446: The rewards for M&A activity were greater for consumer products companies than the average company. For the period 2000–2010, consumer products companies turned in an average annual TSR of 7.4%, while the average for all companies was 4.8%. Given that the cost of replacing an executive can run over 100% of his or her annual salary, any investment of time and energy in re-recruitment will likely pay for itself many times over if it helps

10340-416: The same name by Levitt. Over time, the customer became the driving force behind all strategic business decisions. This marketing concept, in the decades since its introduction, has been reformulated and repackaged under names including market orientation, customer orientation, customer intimacy, customer focus, customer-driven and market focus. In 1985, Ellen Earle Chaffee summarized what she thought were

10450-426: The scope of activities for which a firm seeks to achieve them lead to three generic strategies for achieving above average performance in an industry: cost leadership, differentiation and focus. The focus strategy has two variants, cost focus and differentiation focus." The concept of choice was a different perspective on strategy, as the 1970s paradigm was the pursuit of market share (size and scale) influenced by

10560-448: The seller. Asset purchases are common in technology transactions in which the buyer is most interested in particular intellectual property but does not want to acquire liabilities or other contractual relationships. An asset purchase structure may also be used when the buyer wishes to buy a particular division or unit of a company that is not a separate legal entity. Divestitures present a variety of unique challenges, such as identifying

10670-442: The seller. With pure cash deals, there is no doubt on the real value of the bid (without considering an eventual earnout). The contingency of the share payment is indeed removed. Thus, a cash offer preempts competitors better than securities. Taxes are a second element to consider and should be evaluated with the counsel of competent tax and accounting advisers. Third, with a share deal the buyer's capital structure might be affected and

10780-414: The size of a company increases, but this is not always the case as the nature of the business and the industry it is operating in can influence the complexity of the valuation task. Objectively evaluating the historical and prospective performance of a business is a challenge faced by many. Generally, parties rely on independent third parties to conduct due diligence studies or business assessments. To yield

10890-439: The skill of a firm in converting its plans into reality; and the skill of a firm in managing its own internal resistance to change. Bruce Henderson , founder of the Boston Consulting Group , wrote about the concept of the experience curve in 1968, following initial work begun in 1965. The experience curve refers to a hypothesis that unit production costs decline by 20–30% every time cumulative production doubles. This supported

11000-409: The strategic thinking or strategy making activity. Strategic management is often described as involving two major processes: formulation and implementation of strategy. While described sequentially below, in practice the two processes are iterative and each provides input for the other. Formulation of strategy involves analyzing the environment in which the organization operates, then making

11110-490: The target company to the buyer. The documentation of an M&A transaction often begins with a letter of intent . The letter of intent generally does not bind the parties to commit to a transaction, but may bind the parties to confidentiality and exclusivity obligations so that the transaction can be considered through a due diligence process involving lawyers, accountants, tax advisors, and other professionals, as well as business people from both sides. After due diligence

11220-477: The term "distinctive competence" in referring to how the Navy was attempting to differentiate itself from the other services. He also formalized the idea of matching the organization's internal factors with external environmental circumstances. This core idea was developed further by Kenneth R. Andrews in 1963 into what we now call SWOT analysis , in which the strengths and weaknesses of the firm are assessed in light of

11330-400: The term "strategy" was primarily used regarding war and politics, not business. Many companies built strategic planning functions to develop and execute the formulation and implementation processes during the 1960s. Peter Drucker was a prolific management theorist and author of dozens of management books, with a career spanning five decades. He addressed fundamental strategic questions in

11440-632: The topic brand architecture . Most histories of M&A begin in the late 19th century United States. However, mergers coincide historically with the existence of companies. In 1708, for example, the East India Company merged with an erstwhile competitor to restore its monopoly over the Indian trade. In 1784, the Italian Monte dei Paschi and Monte Pio banks were united as the Monti Reuniti. In 1821,

11550-547: The transaction and going down into detail about what to do about overlapping and competing product brands. Decisions about what brand equity to write off are not inconsequential. And, given the ability for the right brand choices to drive preference and earn a price premium, the future success of a merger or acquisition depends on making wise brand choices. Brand decision-makers essentially can choose from four different approaches to dealing with naming issues, each with specific pros and cons: The factors influencing brand decisions in

11660-406: The way in which they are financed and partly by the relative size of the companies. Various methods of financing an M&A deal exist: Payment by cash. Such transactions are usually termed acquisitions rather than mergers because the shareholders of the target company are removed from the picture and the target comes under the (indirect) control of the bidder's shareholders. Payment in the form of

11770-536: Was expected that the merged charity would save around £2 million a year in running costs compared to operating independently. Kay Boycott was appointed as the first chief executive of the partnership having been the incumbent chief executive of Asthma UK at the time of the merger. The British Lung Foundation's records with the Charity Commission and Companies House were renamed and remain in use, while Asthma UK's records were left dormant . On 24 February 2022,

11880-428: Was focused on larger scale and lower cost. Porter revised the strategy paradigm again in 1985, writing that superior performance of the processes and activities performed by organizations as part of their value chain is the foundation of competitive advantage, thereby outlining a process view of strategy. The direction of strategic research also paralleled a major paradigm shift in how companies competed, specifically

11990-451: Was followed by G.E. multi factoral model , developed by General Electric . Companies continued to diversify as conglomerates until the 1980s, when deregulation and a less restrictive antitrust environment led to the view that a portfolio of operating divisions in different industries was worth more as many independent companies, leading to the breakup of many conglomerates. While the popularity of portfolio theory has waxed and waned,

12100-585: Was summarized in the growth–share matrix developed by the Boston Consulting Group around 1970. By 1979, one study estimated that 45% of the Fortune 500 companies were using some variation of the matrix in their strategic planning. This framework helped companies decide where to invest their resources (i.e., in their high market share, high growth businesses) and which businesses to divest (i.e., low market share, low growth businesses.) The growth-share matrix

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