- CFA Exams
- 2023 Level I
- Topic 4. Corporate Issuers
- Learning Module 18. Mergers and Acquisitions
- Subject 3. Mergers and Industry Life Cycle
Why should I choose AnalystNotes?
Simply put: AnalystNotes offers the best value and the best product available to help you pass your exams.
Subject 3. Mergers and Industry Life Cycle PDF Download
Summary:
Characteristics: Firms need capitals to fund development as there is little or no profit.
Motivations: Acquiring unique capabilities and resources, such as capital and management talents.
Types of mergers: Conglomerate and horizontal mergers.
Characteristics: High profit margins, accelerating sales and little competition.
Motivations: Acquiring unique capabilities and resources, such as capital, to expand existing capacity.
Types of mergers: Conglomerate and horizontal mergers.
Characteristics: growth potential still exists but few new entrants to the market.
Motivations: Cost synergy (economy of scale), increasing operational efficiencies.
Types of mergers: Horizontal and vertical mergers.
Characteristics: Increasing competition and capacity constraints.
Motivations: Cost and revenue synergies, external growth, increasing market power, unlocking hidden value.
Types of mergers: Horizontal mergers.
Characteristics: overcapacity, declining profit margins and lower demand.
Motivations: All kinds of motivations.
Types of mergers: Horizontal, vertical and conglomerate mergers.
Sales growth -> Industry life cycle -> Types and motivations of mergers.
Stage: Pioneer / development phase.
Characteristics: Firms need capitals to fund development as there is little or no profit.
Motivations: Acquiring unique capabilities and resources, such as capital and management talents.
Types of mergers: Conglomerate and horizontal mergers.
Stage: Rapid accelerating growth.
Characteristics: High profit margins, accelerating sales and little competition.
Motivations: Acquiring unique capabilities and resources, such as capital, to expand existing capacity.
Types of mergers: Conglomerate and horizontal mergers.
Stage: Mature growth.
Characteristics: growth potential still exists but few new entrants to the market.
Motivations: Cost synergy (economy of scale), increasing operational efficiencies.
Types of mergers: Horizontal and vertical mergers.
Stage: Stabilization and market maturity.
Characteristics: Increasing competition and capacity constraints.
Motivations: Cost and revenue synergies, external growth, increasing market power, unlocking hidden value.
Types of mergers: Horizontal mergers.
Stage: Deceleration of growth and decline.
Characteristics: overcapacity, declining profit margins and lower demand.
Motivations: All kinds of motivations.
Types of mergers: Horizontal, vertical and conglomerate mergers.
Learning Outcome Statements
d. explain, based on industry life cycles, the relation between merger motivations and types of mergers;CFA® 2023 Level I Curriculum, Volume 3, Module 18
User Contributed Comments 0
You need to log in first to add your comment.

I am happy to say that I passed! Your study notes certainly helped prepare me for what was the most difficult exam I had ever taken.

Andrea Schildbach
My Own Flashcard
No flashcard found. Add a private flashcard for the subject.
Add