130
C H A P T E R 1 0
MERGERS, ACQUISITIONS AND ALLIANCES
Illustration 10.1
Who bought whom?
1. Why did Disney acquire Marvel?
There are good strategic rationales for the Marvel takeover, from the point of view of
Disney. First, it gets ownership of a potential stream of new products in order to target an
2. Critically assess how well these companies fit together in (i) strategic and (ii) organisational
terms.
Marvel possesses a unique collection of brands that fit strategically with the way in which
Disney competes in the entertainment industry as a differentiator. If one considers a
~VRIO analysis, Marvel superhero brands can be considered valuable, rare, inimitable and
capable of utilisation by Disney. From a market perspective the acquisition gives Disney an
opportunity to build greater market share in the teenage boy segment and for Marvel it
131
Illustration 10.2
Staying power
1. Using Haspeslagh and Jemisons matrix, assess Tatas integration approach to JLR.
With regard to the Haspeslagh and Jemison matrix (Figure 10.3), the initial approach
appears to be Preservation as there is a clear statement that JLR has high levels of autonomy
2. How do you explain Tatas success at JLR?
Tata did become impatient during the crisis, revoking a guarantee on jobs that had been
given in return for wage and other benefit cuts. A total of 2,200 workers were fired. CEO
David Smith was replaced in January 2010 by a senior executive with a BMW background;
Illustration 10.3
Apple’s iPad advantage
1. What are the pros and cons of Apples tight control of licensing?
Students may have strong opinions on Apples licensing policies. Tight control gives Apple
the ability to manage quality and consistency of feel throughout the Apple range. This
132
2. What role has ecosystem played in Apples competitive advantage?
The hands-off relationship with companies such as Griffin and Logitech allows it to foster
competition and thereby hopefully promote the widest possible range of accessories. The
market will select the most successful, and Apples brand may be protected from failures.
Illustration 10.4
International HIV/AIDS alliance: trust and co-evolution
1. What role does trust play in the Alliance?
Trust is highlighted in Section 10.4.3 as a key issue in the alliance process. International
HIV/AIDS alliance operates as a family of independent units where trust is the key to
2. What evidence is there that this Alliance has evolved and continues to evolve?
Co-evolution is also highlighted in Section 10.4.3 as a key issue in the alliance process.
Initially, the Secretariat provided expertise and technical support to Alliance members by
Illustration 10.5
Nuclear fission: Areva and Siemens break up
1. Why did co-evolution break down in the Areva NP joint venture?
The breakdown of the alliance was a classic one of termination by divorce in terms of
133
2. Why was the termination of this joint venture messy?
The points of tension specifically were the following:
Siemens lack of control over what would be a substantial part of its business
Key Debate
Merger madness?
This debate helps reinforce a critical approach to managerial behaviour and strategy. Returning
to the principalagent problem raised in Chapter 4, students are reminded that they should not
always trust managers to serve shareholders interests. Strategic claims should be treated
sceptically.
If picking a large enough sample, students should find a range of share price movements
Question 2 suggests that the students find examples of resistance to hostile takeovers in order to
establish how target management seeks to resist them. Of course, the tactics will vary by
circumstance but the general picture should emerge that there are two broad approaches which
Video assignment
Love Da Pop
This is a very unusual case which examines the development of a very unusual company! Love
Da Pop was the brain child of three maverick entrepreneurs who had the idea of turning an age
old snack food (popcorn) into a trendy new foodstuff with unusual flavours and a zany image.
The business took off after successfully pitching on the TV show Dragons Den and getting the
support of Peter Jones (one of the dragons). A key factor in their success was the strategic
alliance with Corn Poppers Limited a manufacturer who enabled Love Da Pop to turn their
ideas into successful products. The case links to Section 10.4 but elements of the case are
relevant to entrepreneurship in Chapter 9.
1. The motives for and potential benefits of strategic alliances are many and varied see
Section 10.4. In the case of Christian Hartmann (and his fellow entrepreneurs in Love Da
Pop), he recognises the crucial importance of finding the right partner in this case a
manufacturing company that they could work with. Strategic alliances only work if there is
2. This question follows on from the previous question. Section 10.4.3 stresses the importance
of co-evolution and trust for alliances to work effectively and be successful over a long
Assignment 10.1
Public and Private Sector M&A
One of the main points of this assignment is for students to show awareness of the advantages
and disadvantages of growing through M&A compared with other organic and non-organic
methods. This may encompass issues of speed of expansion, risk, flexibility and performance.
Assignment 10.2
This question requires students to track a bidder and a targets stock price over time. Stock
price reactions (to not only bids but also other events such as major innovations, reorganisations
or alliances) are useful metrics for how investors evaluate strategies. Section 10.3.3, particularly
on valuation of acquisitions, may be helpful (also the Key Debate on Merger Madness?). The
underlying theoretical position is that few bids are strongly positive for the acquiring firms
investors; the investors of the target firm reap most of the benefits in the price paid by the
acquirer.
Assignment 10.3
The purpose of this assignment is for students to use the case example as a way of exploring the
strengths and weaknesses of different post acquisition integration styles in the Haspeslagh and
Jemison matrix. The Preservation style has the advantage of leaving the acquired company
alone so there is little risk of the acquired business being damaged. The disadvantage is that
Assignment 10.4
The main reasons for pursuing M&A over alliances is when the assets and resources cannot be
accessed and fully controlled by other means and where contracts do not function effectively. In
some institutional contexts, alliances can result in knowledge spill-overs and so the loss of
Assignment 10.5
Family-owned companies are likely to prefer organic development to acquisitions or alliances
because:
acquisitions typically require substantial capital, often obliging the acquirer to raise money
137
Integrative assignment 10.6
Many M&A fail, so students should consider the alternatives. This will quickly lead to a
Case Example
Final Fantasy? Acquisitions and alliances in electronic games
1. Explain why Square Enix chose alliances in some cases and acquisitions in others.
This question about choice of alliances versus acquisitions is only partly approachable by
the Buy, Ally or DIY matrix in Figure 10.6. Both acquisitions and alliances help Square
Enix in the fast pursuit of its diversification and internationalisation strategies, an urgent
need. In a highly uncertain environment, both buy and ally approaches help to manage risk.
138
2. How should Square Enix manage its Eidos acquisition in order to maximise value creation,
and how might that management approach change over time?
The management of Eidos will be challenging for Square Enix, given the business reliance
on soft capabilities (brilliant games designers, etc.) and the extent of cultural and
geographic distance (see the CAGE framework in Section 8.5.1). The quotations of Yoichi
Wada on the intended management style are highly relevant and seem to be sensitive to the
key issues involved. Various frameworks are helpful:
The Haspeslagh and Jemison acquisition integration matrix will be useful here (Figure
10.3). There is a high need for organisational autonomy (or at least sensitivity). At the
same time, there is high strategic interdependence (a need to renovate Square Enixs
3. What are the strengths and weaknesses of the alliance strategy, and what problems might
Square Enix anticipate over time?
As indicated by Figure 10.6, the alliance strategy has some clear strengths in terms of
accessing expertise fast. However, the same matrix points to culture and control problems,
4. What methods of expansion would you recommend to the management of Square Enix now
they appear to have the resources and intention to grow?
Although organic growth might enable Square Enix to engage in a less risky expansion the