208 Part 2: Strategic Actions: Strategy Formulation
jurisdictions equate to a leading gold intermediate and a significant re-rate opportunity
for our collective shareholders.”^11
Even though the transaction that was proposed to take place between Alamos and
AuRico was to be a merger of equals, evidence suggests that finalizing a proposal for firms
to merge on an equal or a relatively equal basis is difficult. In an analyst’s words:
“A merger of equals: It’s how executives love to present big corporate tie-ups. The reality is
that it isn’t easy working out how to share control of multibillion-dollar businesses among
strong-willed executives and reassure shareholders, wary of how management infighting can
destroy value in meagdeals.”^12
On a practical basis, deciding who will lead the merged firm, how to fuse what are
often disparate corporate cultures, and how to reach an agreement about the value of each
company prior to the merger are issues that commonly affect firms’ efforts to merge on
a coequal basis.
To more fully consider issues such as these and others that surface when firms pro-
pose to merge as equals, we discuss the merger between Swiss-based Holcim Ltd. and
French-based Lafarge SA in the Strategic Focus. Prior to deciding to merge, Holcim and
Lafarge were long-time competitors. As we discuss, the route to finalizing this merger was
not without challenges.
An acquisition is a strategy through which one firm buys a controlling, or 100 percent,
interest in another firm with the intent of making the acquired firm a subsidiary business
within its portfolio. After the acquisition is completed, the management of the acquired
firm reports to the management of the acquiring firm.
Although most mergers that are completed are friendly in nature, acquisitions can be
friendly or unfriendly. A takeover is a special type of acquisition where the target firm does
not solicit the acquiring firm’s bid; thus, takeovers are unfriendly acquisitions. As explained
in Chapter 10, firms have developed defenses (mostly corporate governance devices) that
can be used to prevent an unrequested and undesired takeover bid from being successful.^13
Commonly, firms think of unsolicited bids as “hostile” takeovers. When such a bid
is received, the takeover target may try to determine the highest amount the acquiring
firm is willing to pay, even while simultaneously using defense mechanisms to prevent a
takeover attempt from succeeding. Multiple exchanges may take place between a poten-
tial acquirer and its target before a resolution to the unsolicited bid is reached; and these
exchanges can become quite complicated. The exchanges among Teva Pharmaceutical,
Mylan N.V., and Perrigo Company that were initiated in the spring of 2015 demonstrate
this complexity. Mylan made a hostile bid for Perrigo before receiving a hostile bid itself
from Teva. The following comment captures the complexity of this situation:
“But Teva says it doesn’t want Mylan if Mylan buys Perrigo, Perrigo rebuffed Mylan’s offer,
and earlier, Mylan said it wasn’t thrilled with Teva’s takeover interest.”^14
As the three firms worked to sort out the matter, some felt that the price firms would
ultimately be willing to pay to complete an intended transaction would decide the fate of
the hostile takeover bids involving the three firms.
On a comparative basis, acquisitions are more common than mergers and takeovers.
Accordingly, we focus the remainder of this chapter’s discussion on acquisitions.7-2 Reasons for Acquisitions
In this section, we discuss reasons why firms decide to acquire another company. As this
discussion shows, there are many unique reasons that firms choose to use an acquisition
strategy.An acquisition is a strategy
through which one firm buys
a controlling, or 100 percent,
interest in another firm with
the intent of making the
acquired firm a subsidiary
business within its portfolio.
A takeover is a special type
of acquisition where the
target firm does not solicit
the acquiring firm’s bid; thus,
takeovers are unfriendly
acquisitions.