Question

CHAPTER 6
CORPORATE-LEVEL STRATEGY

CHAPTER 7
ACQUISITION AND RESTRUCTURING STRATEGIES

MITSloan Management

CEMEX: Globalization “the CEMEX way”

Donald R. Lessard and Cate Reavis

1. As we read in Chapters 6 &7, mergers & acquisitions are a major form of corporate diversification strategy. Using the lecture slides on Chapter 7, identify and discuss the top three reasons why most (50-60%) of acquisitions fail to create shareholder value.

2. What are the five major components of “CEMEX Way” and why has this approach been so successful in post-acquisition integration?

3. In your opinion, what can other companies learn from the “CEMEX Way” as a benchmark     for acquisition management?

Answer 1

1.
Top three reasons due to which acquisitions fail to create shareholder value are as follows:

(i) Inadequate understanding of the market creates overconfidence in the minds of purchaser: The understanding of the market differently and building the confidence of establishing the market (or changing the lifestyle in just an action) differently lead to overconfidence due to which many acquirers commence some mistake. This is the common reason which leads to failure in building shareholder's value.

(ii) Lack of focus on human resource: Human resource development or understanding the nature of human's in the company is often neglected by the acquirer which later disturbs the functioning and culture of the company due to which value of company is affected. Disturbance in value of company leads to failure in shareholder's value.

(iii) Inadequate process: The process of merger and acquisition is complex and time consuming. The inadequate functioning and assigning of duties to the management. Improper dealing in the ending account balances of merger and acquisition is another factor which disturbs the value of company which later leads to failure in creating value to shareholders.