Successful in Utilizing the Merger and Acquisition Strategy
You must answer BOTH SETS of case questions (both carry equal weighting).
words requirement: 2000 words
Case questions:
1. Discuss CRH’s acquisition strategy and its contribution to the firm’s success (50%)
2. How does the Group’s corporate strategy create value for CRH? If you were
advising CRH, what strategy might you recommend? Why? ........................ (50%)
Supplementary reading:
Johnson, G., Whittington, R., Scholes, K., Angwin, D., & Regner, P. 2017. Exploring
Strategy: Text and Cases. 11th Edition. Pearson.
Structure of the assignment：
Please include a table of contents for your assignment. This will make grading more straightforward. Answer each of the two sets of questions separately. You may want to write a short introduction and conclusion/summary for each set of questions. However, there is no word requirement for the short introduction and conclusion. It is more important to say what you have to say if you decide to have an introduction and conclusion. In brief, in the introduction, you need to inform the reader what you are going to do to answer the case question. In the conclusion/summary, you just need to summarise what you have done to answer the case question.
References： Harvard referencing style
There is NO requirement for the number of references used. However, while using the theories and analytical tools and so on, you will necessarily need to provide references for academic sources (including for the course textbook and supplementary reading) that back up the theories and tools you use. Normally around 5 references or slightly more should suffice.
External information beyond the case study：
You need NOT collect additional data or materials in relation to the case company. Relying only on the case information is sufficient. The idea is to use what we have learned (e.g. theories, perspectives, analytical tools and models) to analyse the case study and answer the questions.
CORPORATE STRATEGY
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Table of Contents TOC \o "1-3" \h \z \u Case Study Question 1 PAGEREF _Toc66988600 \h 3Introduction PAGEREF _Toc66988601 \h 3CRH’s Strategy PAGEREF _Toc66988602 \h 3M&A and CRH’s Success PAGEREF _Toc66988603 \h 4Conclusion PAGEREF _Toc66988604 \h 5Case Study Question 2 PAGEREF _Toc66988605 \h 6Introduction PAGEREF _Toc66988606 \h 6Recommended Corporate Strategy PAGEREF _Toc66988607 \h 8Conclusion PAGEREF _Toc66988608 \h 9References PAGEREF _Toc66988609 \h 10
Case Study Question 1
Introduction
Mergers and acquisitions are core components and strategic management and corporate finance. Both are technical terms that describe the consolidation of companies. A merger describes a strategic move where two companies combine to form a unit. On the other hand, the acquisition process describes strategic processes where one company purchases another or completely observe another. Merger and acquisition (M&A) strategy is a complex process that involves many parties and thus requires sufficient preparation, analysis, and deliberations (Johnson et al., 2017, 341). When these processes are carefully followed, companies involved in M&A stand to benefit from the strategy significantly. CRH plc is among the companies that have successfully and successively utilized M&A strategy to propel its growth and rise to global leadership in the building materials industry.
CRH’s Strategy
CRH has utilized a merger and acquisition strategy for decades. As evidenced from the case study, the group’s foundation has its roots in a merger that happened in 1970. The Group resulted from a merger between Irish Cement Limited and Redstone (Moroney, 2014, 706). Over the years, CRH has made M&A its main strategy of expansion. The group has perfected the strategy to the extent of developing an elaborate process for use while merging or acquiring another company. The M&A strategy has also been successfully integrated with CRH’s business model. As Moroney 2014 asserts, acquisitions play a significant role in the five key components of CRH’s business model (708). For instance, the Group uses acquisitions to keep its portfolio balanced. This function is achieved through acquiring legacy businesses that can easily be reinforced to significantly add to the overall balance of the Group’s portfolio.
The acquisition strategy is in some instances affected by integration difficulties. Some of such difficulties emerge from a lack of enough information regarding the operations of the company targeted for acquisition. Over the years, CRH has developed a comprehensive acquisition strategy that prevents the Group from experiencing difficulties. One of the notable characteristics of CRH acquisition strategy is the network of teams spread around the world for the purposes of identifying potential acquisition targets. This strategy has proven useful with regard to a comprehensive evaluation of a company before the acquisition process.
As Johnson et al., 2017 assert, one of the issues that prevent successful corporate acquisitions is having managers of the acquiring company spend a lot of time appraising the target firm (346). CRH deals with this issue by having appraisal teams spread across the world to evaluate the Group’s prospects of getting involved in acquisitions. CRH’s acquisition strategy is characterized by focusing on geographic market leaders, careful acquisition deal structuring, and retaining owner-managers. All these characteristics ensure smooth continuity of the acquired company and stability of CRH.
M&A and CRH’s Success
Companies use M&A strategy for various reasons. According to Ahmed et al. (2018), strategic competitiveness is among the major reasons why firms adopt the M&A strategy (202). This seems to be the major reason behind the acquisition strategies used by CRH. The Group has, over the years, acquired strategic firms for the purposes of expanding its operations. These acquisitions have played a significant role in boosting the Group’s strategic competitiveness and, eventually, the successful growth of the company. Additionally, strategic acquisitions can help companies in the diversification of their portfolio. CRH understands that remaining a world leader in any industry requires a diversified company portfolio. The building materials industry is characterized by many processes and products. As Moroney (2014) asserts, it entails extraction, manufacturing, and supply of construction materials (705). Becoming a world leader would require a company to get involved in the majority of all of these processes. CRH uses an M&A strategy to get involved in as many construction processes and products as possible. This strategy is mainly intended at increasing diversification of the Group’s portfolio which is essential in maintaining a top leadership position in the global building materials industry.
Acquisitions are also used to help in overcoming market entry barriers (Johnson et al., 2017, 348). This is especially important when a company is considering entering foreign markets. CRH has historically used acquisitions as strategic moves to enter into foreign markets. For example, the Group acquired C.R. Lawrence for $1.3 billion in 2015 as a strategy to enter glass space in North America Moroney, 2014, 708). The international acquisitions have helped the company expand in the global building industry to the extent of becoming second best. Formerly. CRH strategized at acquiring medium-sized and privately run organizations.
However, the Group has recently advanced to acquiring multinational corporations. For instance, the Group successfully acquired Lafarge and Holcim (LH) in 2015 in a historical deal of €6.5 billion (Moroney, 2014, 711). This acquisition helped CRH to clinch its spot as the second-placed in the global building material industry (Moroney, 2014, 711). With this strategy, CRH has the potential to achieve its objective of becoming the global leader in the building industry.
Conclusion
It is certain that CRH plc has been successful in utilizing the merger and acquisition strategy to expand its operations. As evidenced in the discourse, M&A strategy is at the core of the Group’s operations. The very foundation of CRH has traces of M&A strategy. After the foundational merger, CRH has embraced acquisitions as the main strategy of its success. The Group utilizes the strategy to increase the diversification of its portfolio, reshape its competitive scope around the world and overcome ne...