Marketing-Related Motives in Mergers & Acquisitions: The by Denise Dahlhoff

By Denise Dahlhoff

The U.S. meals skilled a wave of mergers and acquisitions (M&As) through the moment half the decade. more and more, marketing-related pursuits were suspected to reason those M&As.

Denise Dahlhoff investigates the reasons underlying the M&A task within the U.S. nutrition within the moment 1/2 the decade. the point of interest is on marketing-related factors, specifically manufacturers, as a driving force of M&As. using the shareholder price framework, the writer explains the surge of M&As within the U.S. meals lately; she explores the explicit factors of important M&As within the nutrition undefined, linking those factors to shareholder price drivers; she develops a quantitative size instrument for depicting corporations' M&A purpose and applies it in a pilot learn. together with either advertising and marketing and monetary views, Denise Dahlhoff demonstrates how marketing-oriented M&As can generate progress and, finally, shareholder price. The findings of this research will be utilized to equally based industries, particularly patron goods.

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Given the less binding character compared to M&As, antitrust concems are less likely to become an issue. Strategie alliances, even between competitors, have become quite popular, especially when it comes to entering foreign markets (Newman and diCicco 1998, 25). The proliferation ofintemational partnerships and joint ventures, especially in the last decade, is due to firms' efforts to globalize (Kvint 1998, 295). , in China, India and the former Soviet bloc countries). Plenty of examples can be found for collaborative agreements between companies.

Third, compared to intemal growth programs, which can require huge efforts to develop product know-how and to gain market access, the cost of M&As are estimable. While the cost of intemal growth programs is comparably uncertain, the cost associated with M&As is essentially the negotiated transaction price. Summarizing these three aspects, the risk of extemal expansion tends to be lower, because the expected cash :flows are better estimable compared to intemal growth. Nevertheless, a downside of M&As regarding risk can be the integration process, which is crucial for meeting the expected, merger-caused value creation.

Traditionally, retailers' favor for private Iabels has been largely attributed to the higher margin spans (Edgecliffe-Johnson 2001a; Hays 2001). According to the Food Institute, retailers' margin on store brands is 10-19% higher than that on national brands (Bear Stearns 2000, 20). 33 Major reasons cited for the higher pro:fits are the usually missing advertising expenses and the Iack of a middleman (Hays 200 1). Yet, more recent studies, summarized in Corsqens and Lal's (2000, 282-283) paper, find that the ultimate total contribution of store brands is not necessarily higher.

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