Instructors’ Manual to Accompany Contemporary Strategy Analysis (9th edn. Wiley, 2016)
CHAPTER 15. EXTERNAL GROWTH STRATEGIES:
MERGERS, ACQUISITIONS, AND ALLIANCES
Introduction
Like its preceding chapter (Chapter 14, “Implementing Corporate Strategy: Managing The Multibusiness
Firm”), Chapter 15 is concerned with strategy implementation rather than strategy formulation. Mergers,
acquisitions and alliances are mechanisms by which strategy implemented rather than strategies
themselves. As a consequence, the key strategic issues that motivate mergers, acquisitions and alliances
have been discussed in other chapters of the book: Chapter 7 on achieving economies of scale, Chapter 8
on acquiring the capabilities needed to manage strategic change, Chapter 9 on exploiting innovation;
Class Outline
Because the theories relating to mergers, acquisitions and alliances is diverse and the empirical evidence
inconsistent and idiosyncratic, my treatment of this topic relies heavily on case analysis. My own case on
Bank of America’s acquisition of Merrill Lynch offers insight into different aspects of M&A decision
making including:
• The tendency for M&A initiatives to be driven by management hubris.
• The “lemons problem” arising from asymmetric information (the buyer of a company has access
The problems that have accompanied so many mergers and acquisitions have increased the relative
attractiveness of alliances as a means of combining the resources and capabilities of different firms. I
emphasize how alliances have proving especially attractive in certain contexts—especially in
Cases
Cases, 9th edn., Wiley, 2016)
In December 2008, Bank of America’s board has its final chance to withdraw from its acquisition of
The Walt Disney Company and Pixar, Inc.: To Acquire or Not to Acquire? (by Juan Alcacer, David J.
The case reinforces the lesson that expanding scope creates value when it passes the “better off” and
“ownership” tests and to apply those tests to the vertical integration decision. Also exposes the limitations
of contracts and the difficulty in valuing relational assets.
A Big (Double) Deal: Anadarko‘s Acquisition of Kerr-McGee and Western Gas Resources (by Clayton
combination of resources, processes and people involved in these deals was complex and powerful. The
announcement presented a real investor relations challenge for Anadarko. How would Anadarko explain
the deals? How would the companies combine to build the most value? What would be divested to pay
back the cash? What was the strategy behind these transformative deals? How was this pulled off so
quickly and effectively?
Renault-Nissan: The Paradoxical Alliance (by P. Morosini, ESMT, case no. 305-0047-1, 2008,
available from the Case Center)
The alliance between French car company Renault and the Japanese car company Nissan has been one of
the most successful strategic alliances in the history of the automobile industry. Allowing Renault to join
