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:

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

Andrea Schildbach

My Own Flashcard

No flashcard found. Add a private flashcard for the subject.

Add

Actions