The Importance of Merger and Acquisition
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Hi, I am looking for assistance with the following questions:
1. Apple Inc. is one of the best-known global technology companies. Who are Apple's primary customers? Current and potential competitors? Suppliers? How would you assess Apple's bargaining power with respect to its customers and suppliers? What are Apple's strengths and weaknesses versus its current competitors? Would an acquisition be appropriate to capitalize on these strengths and/or mitigate the weaknesses?
2. On Monday, November 5, 2012, Netflix Inc. adopted a shareholder rights plan intended to block activist investor Carl Icahn from expanding his nearly 10% stake in the company. Under the plan, Netflix's shareholders will be given the right to buy more stock if any individual investor acquires more than a 10% stake in the company.
(a) What is a shareholder rights plan and how would such a plan help to block an activist investor from expanding his/her stake in a company?
(b) Shareholder rights plans are one example of corporate takeover defenses. Discuss four other defenses that a company can employ to defend itself against an unwanted takeover attempt, explaining each defense and identifying how it helps to protect against an unwanted bid.
(c) Do you believe that takeover defenses are more motivated by the target's managers attempting to entrench themselves or to negotiate a higher price for their shareholders?
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Solution Summary
The importance of Merger and Acquisitions are determined. Current and potential competitors are given.
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1. Apple's primary customers are the upper middle class, with an annual income of $60,000 and above. Its top three current competitors are Hewlett-Packard Company, Google Inc. and Blackberry Limited, so the potential competitors would be similar companies, such as Microsoft, Samsung and IDC. Its top suppliers are Cheng Uei Precision Industry Co., Ltd, China; Hon Hai Precision Industry Co., Ltd. in Sao Paolo, Brazil, and six locations in China;PCH International, Pegatron Corporation and Primax International, all from China; and Quanta Electronics in Fremont, California, US and two locations in China.
Apple's bargaining power with respect to its customers lies in its differentiated products which integrate hardware and software. With respect to its suppliers, Apple buys in such large quantities, 60% of the components for touch screens, for instance, that it exercises significant leverage over its suppliers.
Ryan Guenette lists these strengths and weaknesses:
Strengths:
- Apple is valued at $567.28 billion on the market, and they didn't get to where they are by snoozing, they got their by being an industry trailblazer and consistently innovating.
- The company possesses one of most globally recognized brands, right up there with Coca-Cola and McDonald's.
- Brand loyalty is incredible, people will line up in the freezing cold overnight just to be one of the first to get their hands on the new iPhone, iPad, or Mac.
- The company is irrationally undervalued, with a price to earnings ratio of 13.68, significantly lower than slower growing companies like Coca-Cola and McDonald's.
- The company's year over year growth is still fast-paced, in the double-digit area for the past couple of years, and the company has just recently paid out its first dividend, which annualized at current prices yields around 1.75%.
Weaknesses:
- Some analysts say that without the legendary founder Steve Jobs at the helm innovation may slow, as Tim Cook is a good CEO, but just not the same.
- Apple operates and sells items in one of the most competitive sectors in the world, and will always have competition that will offer something very similar for a bit less.
- Competition from deep-wallet companies such as Google, Microsoft, and Amazon may sometimes lead to the compression of ...
Education
- MEd, Grand Canyon University
- MBA, University of Phoenix
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