homework help 4395

Brews (1987) held interviews with 20 senior South African Executives concerning the practice adopted by their firms in the execution of mergers and take-overs. The study focused on the formulation of a merger and takeover strategy, formulation of an acquisition profile and the identification of critical success factors in adopting a strategy of growth through mergers and take-overs. It was found that 11 out of 20 had formally adopted a growth by take-over strategy. Reasons advanced for this strategy include the achievement of economies of scale, it was cheaper to buy than to build and the company was cash-rich and existing markets were mature: it was found that 14 of the 20 respondents had an expressed acquisition profile. The profile included factors such as required rates of return, the nature of the business, management, and maximum/ minimum criteria in respect to the size of the investment. Respondents indicated that takeover candidates should in the same or a related, industry. In line with this conclusion .most mergers represented either horizontal or vertical type mergers. In the USA, most mergers were found to be of conglomerate type; this may be due to the anti-trust laws applicable in the USA.


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