When one company wants to take over another, it’s probably because it’s a lean, mean, profit-making machine. When the company that’s getting the up-down from a hostile bidder doesn’t want to be bought by that other company, it may deploy the “fat man strategy.”
The fat man strategy is a defensive move by a business where they “bulk up” on business “fat,” like debt, and decrease business “muscle,” or cash reserves and liquid assets. The idea is that the defensive company says to themselves “maybe if I put on some weight and start looking less attractive, that other company will go away and leave me alone…”
As funny as it sounds, the fat man strategy can be serious business. A company employing this strategy could potentially make things difficult for itself down the road by taking on new debt and reducing cash, just to ward off imperialist company takeovers. After all, it wouldn’t be much of a defense if the tactics were easy to reverse.
By adding more assets, the defensive company is opening itself up to a new world of risks. Even worse, if these transactions take too long, the company could get bought out before they’re finished going through.
Whoops. Worth it? Maybe…but maybe not.
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Finance: What's the difference between m...23 Views
Finance allah shmoop what's the difference between mergers and acquisitions
all right people listen up Merger that's what's about to
happen here it's a merger acquisition that's what's about to
happen here Corporate america is kind of same thing when
two companies merge while they generally you know attracted to
each other hopefully respect each other they share stock or
combined the stocks of each side and you know combine
efforts and then and then cuddle afterwards if they're successful
at the merger than the combination of two roughly equals
yields more than the one plus one combo that made
them so two companies get together on generally equal ish
footing In that case acquisitions are a combining more like
that eating thing on much different footing The large company
eats or buys the target either using its more highly
valued stock currency or it's taft to do so Well
why would a company acquire another Well the target might
have one hundred employees ninety of whom can be fired
with massive expense savings after the acquisition For the acquirer
such that economically the acquisition won't just makes a whole
lot of financial sense acquisitions happen for market power reasons
As well like imagine the negotiating leverage that amazon would
have if it bought the next five biggest online retailers
Or maybe it'll just kill them Probably not legal for
them to buy him anyway given the monopoly like dominance
of amazon these days But wow that would be a
powerful set of acquisitions And that would be a good
reason for ems on to acquire a whole bunch Things
and bezos would grow even more powerful maybe too powerful
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