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158 PART 2 • STRATEGY FORMULATION

to stock issuances as a source of capital. Sometimes, the unique advantages
of being privately and publicly held can be synergistically combined in a joint
venture.
• When a domestic organization is forming a joint venture with a foreign company; a
joint venture can provide a domestic company with the opportunity for obtaining
local management in a foreign country, thereby reducing risks such as expropriation
and harassment by host country officials.
• When the distinct competencies of two or more firms complement each other
especially well.
• When some project is potentially very profitable but requires overwhelming
resources and risks.
• When two or more smaller firms have trouble competing with a large firm.
• When there exists a need to quickly introduce a new technology.

Merger/Acquisition
Merger and acquisition are two commonly used ways to pursue strategies. A merger
occurs when two organizations of about equal size unite to form one enterprise. An
acquisition occurs when a large organization purchases (acquires) a smaller firm, or vice
versa. When a merger or acquisition is not desired by both parties, it can be called a
takeover or hostile takeover. In contrast, if the acquisition is desired by both firms, it is
termed a friendly merger. Most mergers are friendly.
There were numerous examples in 2009 of hostile takeover attempts. For example,
Swiss drug company Roche Holding AG in 2009 launched an $86.50-a-share hostile
takeover for the 44.2 percent of Genentech Inc. that it did not already own. Genentech’s
board of directors strongly urged shareholders not to accept the Roche Holding offer,
saying that Roche’s $40 billion offer was inadequate. Genentech’s board said the firm was
worth $112 per share at the time. A few weeks later, Roche increased its bid to $93 per
share.
Headquartered near each other in California, Emulex Corp. in May 2009 rejected a
hostile takeover bid from Broadcom Corp. even though the Broadcom offer represented a
40 percent premium over the Emulex current stock price. Emulex installed a “poison pill”
in January 2009 as protection against hostile takeover offers. Both companies produce and
sell networking equipment that connect servers in data centers.
As stock prices have plunged in many companies, their rivals with cash are eyeing
them as takeover candidates. Fertilizer producer Agrium recently offered to buy rival
Deerfield, Illinois–based CF Industries Holdings for $3.6 billion, which created a three-
way hostile takeover battle because CF at the time had a hostile takeover offer on the table
to acquire Terra Industries.
Private-equity-led buyouts, which accounted for 15 percent of all merger and acquisi-
tion in 2007, fell to 6 percent of the total in 2008. That smaller percentage is likely to
remain in place in 2009 as big cross-border deals are unlikely in the near term. Private-
equity investing in tech companies fell almost 80 percent in 2008 to $26.3 billion as
sources of debt financing became scarce.
Private-equity firms such as Blackstone Group Inc. and Kohlberg Kravis Roberts & Co.
that led the massive acquisition trend in 2006–2007 are still around, but they operate much
more carefully now. Such firms are trying today to purchase the agricultural-sciences divi-
sion (Agro Sciences) of Dow Chemical. Dow needs cash to complete its own acquisition of
Rohm & Haas Co. Agro Sciences should be worth between $7 and $10 billion. A rival
Swiss firm named Syngenta AG also is interested in acquiring Agro Sciences.
For all of 2008, global merger and acquisition volume fell 29 percent to $3.06 trillion,
which was on par with 2005. Big deals in 2008 included Mars Inc.’s $23 billion acquisition
of Wm. Wrigley Jr. Co., InBev NV’s $52 billion purchase of Anheuser-Busch, and HP’s
$13.2 billion acquisition of EDS.
In a stock deal that created the nation’s largest home builder, Pulte Homes recently
acquired Centex Corp. for $1.3 billion. This merger signaled a bottom in the housing
market, which had dropped so drastically in the United States in 2008 and early 2009.