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Module 1: Módulo 9: Diversificación y Sinergia

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Integration

Horizontal - Owning (or controlling) a number of similar but separate activities in the same industry of business.

Vertical -
Backward - Diversifying into R/M and other supplies for the company's products - may enable a company to improve the qualify of final product.
Forward - Diversification further down the line to final consumer - direct control on distribution and logistic channel.


Divereification & Synergy
Production Synergy: Company manufarturers coolers, refrigerators, air-conditioning units, getting into room heaters, ovens.

Marketing Synergy: Cricket balls & bats; tennis balls and rackets

Financial Synergy: Fan manufarturers offering discount in winter

Organisation Synergy: Manufacturing organisation starting consulting services

Diversification v/s Expansion: Before diversifying company can & SH. Consider expansion in existing produrt line


Screening Process:
- Identify industries
- Medium scale investment/large scale investment
- Select sectors: based on data w.r.t, sales T/0, ROI, market shares, competition, asset turnover etc
- Choose Cos - by sales turnover & asset level - determines acquisition cost
- Cost of acquisition & returns: Compare candidates
- Ranking: Concept of Fit


Identifying good ones:
High market share Crowing market
Good management system diversified portfolio
ROI above bench marlc level


Assembling suitability of a proposal
- Funds availability
- Likely positive synergies
- Negative synergies & Weaknesses
- Is timing appropriate
- Is required management style available


Valuation for mergers and acquisitions:

P/E Ratio: Market price per share/Net earnings after tax per share