Global Mergers or Joint Ventures
4.2 Global markets and business expansion
What you need to know
• a) Spreading risk over different
countries/regions
• b) Entering new markets/trade blocs
• c) Acquiring national/international brand
names/patents
• d) Securing resources/supplies
• e) Maintaining/increasing global
competitiveness
What is a Joint Venture?
A joint venture (JV) is a
separate business entity
created by two or more
parties, involving shared
ownership, returns and risks
Potential Benefits of a Joint Venture
• JV partners benefit from each other's
expertise and resources (e.g. market
knowledge, customer base, distribution
channels, R&D expertise)
• Each JV partner might have the option to
acquire in the future the JV business based on
agreed terms if it proves successful
• Reduces the risk of a growth strategy particularly if it involves entering a new
market or diversification
Potential Drawbacks of a Joint Venture
• JV partners benefit from each other's
expertise and resources (e.g. market
knowledge, customer base, distribution
channels, R&D expertise)
• Each JV partner might have the option to
acquire in the future the JV business based on
agreed terms if it proves successful
• Reduces the risk of a growth strategy particularly if it involves entering a new
market or diversification
Examples of Global Joint Ventures
Key reasons for this JV:
Pool resources and expertise to
enable innovation and leadership
in an emerging global market
opportunity. Also helps spread risk
Key reasons for this JV:
Enables Jaguar Land Rover to
make cars in China for the first
time (overcoming protectionism)
Examples of Global Joint Ventures
Key reasons for this JV:
Combining two business units into
one in order to give the combined
JV business greater scale and
global competitiveness
Key reasons for this JV:
Enabling a relatively small UK
technology firm to access and
grow in the fastest-growing ecommerce market globally
What is a Merger?
A merger is a combination of two
previously separate firms which is
achieved by forming a completely
new firm into which the two
original businesses are integrated
The Difference between a Merger
and a Takeover
Merger
Takeover
Involves a NEW
FIRM being created
into which two
existing businesses
are “merged”
Involves an
EXISTING FIRM
acquiring more than
50% of another firm
and thereby gaining
control of it
More on Mergers
• A merger is a combination of two previously separate
firms which is achieved by forming a completely firm
into which the two original firms are integrated.
• A merger can be seen as a decision made by two
businesses that are broadly “equal” in terms of factors
such as size, scale of operations, customers etc.
• The enlarged, merged business, through the changes
made by combining both together, can cut costs, grow
revenues and increase profits - which should benefit
shareholders of both the original two businesses.
Examples of Mergers
• 2010: British Airways and Iberia merge to form IAG
• 2000: Glaxo Wellcome plc and SmithKline Beecham plc
merge to form GSK plc
• 2014: Dixons plc and Carphone Warehouse merge to
form Dixons Carphone
• 2015: Paddy Power and Betfair merge to form Paddy
Power Betfair
• 2015: H.J. Heinz Company & Kraft Foods Group merge
to form The Kraft Heinz Company
One to Watch – One of the Largest Global
Mergers of All Time
Key reasons for this Merger
Global market leadership &
economies of scale: newlycreated firm will produce about
30% of the world's beer
Aiming to create “the first truly
global beer company” with a
market share 3x the next largest
competitor
Also takes the new firm into
fast-growing African and new
Latin American markets.