Entry through Internal Development Entry through Acquisition

1. Entry through Internal Development

Entry through internal development involves the creation of a new business entity in an industry, including new production capa-city, distribution relationships, sales force, and so on. Joint ventures raise essentially the same economic issues because they are also new-ly started entities, although they create complicated questions about the division of efforts among the partners and who has effective con-trol.2

The first important point in analyzing internal development is that it requires the firm to confront directly the two sources of entry barriers into an industry—structural entry barriers and the expected reaction of incumbent firms. The entrant through internal develop-ment (hereafter termed internal entrant) must pay the price of over-coming structural entry barriers and face the risk that existing firms will retaliate. The cost of the former usually involves up-front in-vestments and startup losses, which become part of the investment base in the new business. The risk of retaliation by existing firms can be viewed as an additional cost of entry, equal to the magnitude of the adverse affects of retaliation (e.g., lower prices and escalated marketing costs) multiplied by the likelihood that retaliation will occur.

In Chapter 1,1 described in some detail the sources of structural entry barriers and the factors that determine the likelihood of retali-ation. The appropriate analysis of a decision to enter will balance the following costs and benefits:

  1. the investment costs required to be in the new business, such as investment in manufacturing facilities and inventory (some of which may be elevated by structural entry barriers);
  2. the additional investment required to overcome other structural entry barriers, such as brand identification and proprietary technology3;
  3. the expected cost from incumbents’ retaliation against the entry, balanced against
  4. the expected cash flows from being in the industry.

Many capital budgeting treatments of the entry decision neglect one or more of these factors. For example, too often the financial analysis assumes the industry prices and costs prevailing before entry and measures only the clearly visible investments necessary to the business, like constructing manufacturing facilities and assembling a sales force. Ignored are the more subtle costs of overcoming struc-tural entry barriers, such as established brand franchises, distribution channels tied up by competitors, competitors’ access to the most favorable sources of raw materials, or the need to develop propri-etary technology. Also, new entry can raise the prices of scarce sup-plies, equipment, or labor, which means that the entering firm must bear higher costs.

Another factor often neglected is the effect the entrant’s new ca-pacity will have on the supply-demand balance in the industry. If the internal entrant‘s addition to industry capacity is significant, its ef-forts to fill its plant will mean that at least some other firms will have excess capacity. High fixed costs are likely to trigger price cutting or other efforts to fill capacity which will persist until someone exits from the business or until the excess capacity is eliminated by indus-try growth or retirement of facilities.

Even more often neglected in the entry decision is the impact of the probable reactions of existing firms. Under conditions described below, existing firms will react to an entry in a variety of ways. One common reaction is to shave prices, which may mean that the indus-try prices assumed in pro forma calculations of the desirability of en-try must be lower than those prevailing before entry. Prices are often depressed for years after an entry occurs, as they were in corn wet milling following the entries of Cargill and Archer-Daniels-Midland. Entry by Georgia-Pacific also has been disruptive to prices in the gypsum industry/

Other reactions of existing firms may be escalation in marketing activities, special promotions, extension of warranty terms, easier credit, and product quality improvements.

Another possibility is that an entry will trigger a round of exces-sive capacity expansion in the industry, particularly if the new en-trant comes in with more up-to-date facilities than some incumbents have. Industries differ in their instability with regard to capacity ex-pansion, and some of the factors that will make an industry volatile have been described in Chapter 15.

The extent of these reactions and their probable duration must be forecast, and the prices or costs built into the pro forma entry calculation adjusted accordingly.


Incumbents will retaliate to entry if it pays to do so based on ec-onomic and noneconomic considerations. Internal entry is most like-ly to be disruptive and to provoke retaliation, which will harm future prospects, in the following kinds of industries (they are therefore risky entry targets):

Slow Growth. Internal entry will always take some market share from existing firms. However, in a slow-growing market this will be especially unwelcome because it may involve a drop in absolute sales, and vigorous retaliation is likely. If the market is growing rapidly, incumbents can continue strong financial performance even though an entrant takes some market share, and capacity added by the entrant is more quickly utilized without destroying prices.

Commodity or Commodity-Like Products. In such businesses there are no brand loyalties or segmented markets to insulate incum-bents from the effects of a new entrant, and vice versa. Entry in such a situation affects the entire industry, and price cutting is especially likely to occur.

High Fixed Costs. When fixed costs are high, the addition of the new entrant‘s capacity to the market is prone to trigger retalia-tory action by competitors if their capacity utilization falls signifi-cantly.

High Industry Concentration. In such industries an entrant is particularly noticeable and may make a significant dent in one or more incumbent‘s market position. In a highly fragmented industry, the entrant may affect many firms but have only marginal impact. None of them will be hurt badly enough to retaliate vigorously, and none is likely to have the capability to inflict a penalty on the new en-trant. In assessing probable retaliation it is obviously important to identify how seriously each of the incumbents will be affected. The more the effects are felt unequally by incumbents, the more likely are the most seriously affected firms to retaliate. If the shock of the entrant is spread over all the incumbents, it may be less threatening.

Incumbents Who Attach High Strategic Importance to Their Position in the Business. When there are incumbents affected by the new entrant who place a high premium strategically on maintain-ing their share in the business, entry can evoke sharp retaliation. Strategic importance may be the result of heavy dependence on the business for cash flow or future growth, its position as a flagship business for the company, interrelationship between the business and others in the company, and so on. The factors that make a busi-ness strategically important to a company are described in Chapter 3 and in the discussion of exit barriers in Chapter 12.

Attitudes of Incumbent Management. The presence of long- established incumbents, particularly if they are single business com-panies, can result in a volatile reaction to an entry move. In such industries entry is often taken as an affront or an injustice, and retaliation can be very bitter. More generally, the attitudes and back-grounds of the managements of incumbents can play a major role in retaliation. Some managements may have histories or orientations that make them feel more threatened by entry or more likely to react vindictively.5

The past behavior of incumbents concerning entry threats will often provide some indication of how they will react to a new en-trant. Behavior toward past entrants and toward incumbents trying to shift strategic groups are especially useful clues.


Assuming the potential entrant will properly analyze the ele-ments of the decision described above, where is internal entry most likely to be attractive? The answer to this question flows from the basic framework of structural analysis. The expected profitability of firms in an industry depends on the strength of the five competitive forces: rivalry, substitution, bargaining power of suppliers and buyers, and entry. Entry acts as a balance in determining industry profits. If an industry is stable, or in equilibrium, the expected prof-its of entrants should just reflect the height of structural barriers to entry and the legitimate expectations of entrants about retaliation. The potential entrant, calculating its expected profits, should find that they are normal, or average profits, even though the profits of incumbents may be high. Because the entrant must overcome struc-tural entry barriers and bear the risk of reaction from going firms, it faces higher costs than the successful firms in the industry, and these costs eliminate its above-average profits. If the costs of entry did not offset the above-average returns, other firms would already have entered and driven profits down to the level where the costs of entry and the benefits of entry cancel. Thus it will rarely pay to enter an industry in equilibrium unless the firm has special advan-tagesmarket forces are at work that eliminate the returns.

How, then, does a company expect to achieve above-average re-turns from entry? The answer lies in identifying those industry situa-tions in which the market mechanism I have described is not working perfectly. Prime targets for internal entry by a firm fall into one of the following categories:

  1. The industry is in disequilibrium.
  2. Slow or ineffectual retaliation from incumbents may be expected.
  1. The firm has lower entry costs than other firms.
  2. The firm has distinctive ability to influence the industry structure.
  3. There will be positive effects on a firm‘s existing businesses.


Not all industries are in equilibrium.

New Industries. In new, rapidly growing industries, the com-petitive structure is usually not well established and the costs of entry may be much less than they will be for later entrants. Probably no firm will have locked up supplies of raw materials, created signifi-cant brand identification, or have much proclivity to retaliate to an entry. Going firms may face limits on the rate at which they can ex-pand. However, a firm should not enter a new industry just because it is a new industry. Entry will not be justified unless a full structural analysis (Chapter 1) leads to the prediction of above-average profits for a period long enough to justify the investment. It is also impor-tant to note that in some industries the cost of entry for pioneers is greater than that for firms entering later, just because of the costs of pioneering. Some analytical techniques for identifying whether early or later entry is appropriate are discussed in Chapter 10 on emerging industries. Finally, other entrants may well be forthcoming into a new industry, and in order for it to expect profits to remain high the firm must have some economic basis for believing that later entrants will face entry costs higher than its own.

Rising Entry Barriers. Increasing entry barriers mean that fu-ture profits will more than offest the current costs of entry.6 Being first or one of the early entrants can minimize entry costs and also sometimes yield an advantage in product differentiation. However, if many other firms also enter early, this door may be closed. Thus the premium in such industries is on moving early and then facilitat-ing the rise in entry barriers to block later entrants.

Poor Information. A long-run imbalance between the cost of entry and expected profits may be present in some industries because of lack of recognition of this fact by potential entrants. This situa-tion may occur in “backwater,” or obscure, industries which do not come to the attention of many established firms.

It is essential to realize that market forces will be working against the success of the entering firm to some extent. Where the prospects for entry are good because of disequilibrium, the market will be sending the same signals to others, who will be prone to enter as well. Thus a decision to enter must carry with it some clear notion of why the entrant and not other firms will reap the benefits of dis-equilibrium. Often the ability to forecast this rests on the advantages of getting in early by spotting the disequilibrium first. But unless the entrant can create some barriers to imitation, the advantages of being early may be eroded (though not eliminated) over time. An en-try strategy must include consideration of such issues and a plan for dealing with them.


There may also be a favorable imbalance between expected profits and the cost of entry in industries whose incumbents are prof-itable but are sleepy, poorly informed, or otherwise impeded from timely or effective retaliation. If a firm can be among the first to dis-cover such an industry, it can reap above-average profits.

Industries that may be ripe targets for entry do not have the characteristics leading to vigorous retaliation (given earlier) and pos-sess some other unique factors.

Incumbents’ cost of effective retaliation outweighs the benefits. The firm considering entry must examine the calculation each signif-icant incumbent will make in deciding how vigorously to retaliate. It must forecast how large a profit erosion the incumbent must bear if it tries to inflict losses on the entrant. Are incumbents likely to think they can outlast the entrant? The larger the costs of retaliation ver-sus the benefits incumbents want to achieve, the less likely they will retaliate.

The entrant not only can choose industries in which incumbents are less likely to retaliate but also can influence the probability of re-taliation. For example, if the entrant can convince incumbents that it will never give up in its quest for a viable position in the industry, they may not waste money attempting to dislodge it completely.7

There is a paternal dominant firm or tight group of longstand-ing leaders. A dominant firm with a paternal view toward the indus-try may have never had to compete and may be slow to learn. The leader (or leaders) may see itself as the protector of the industry and its spokesperson. It may behave in ways that are best for the industry (e.g., hold up prices, preserve product quality, maintain high levels of customer service or technical help) but not necessarily best for it. An entrant can take a significant position as long as the leader is not provoked to (or is unable to) respond. This sort of situation may well have existed in nickel and corn milling, in which INCO and CPC have lost major positions to new players. Of course the risk in this strategy is that the sleeping giant will be awakened, and thus a judg-ment about the nature of its management is crucial.

Incumbents’ costs of responding are great given the need to pro-tect their existing businesses. This situation offers possibilities for the mixed-motive strategy discussed in Chapter 3. For example, re-sponding to an entrant who is using a new distribution channel may alienate existing distributors’ loyalties. Opportunity is also present if an incumbent‘s response to a new competitor will cut into sales of its bread and butter products, will help legitimize the strategy of the entrant, or will be inconsistent with the incumbent‘s image in the marketplace.

The entrant can exploit conventional wisdom. When incum-bents believe in conventional wisdoms or certain key assumptions about how to compete in the industry, a firm with no preconceived notions can often see situations in which the conventional wisdom is inappropriate or outmoded. Conventional wisdom can creep into product line, service, plant location, and nearly any other aspect of a competitive strategy. Incumbents may cling tenaciously to such con-ventional wisdom because it has worked well in the past.


A more common and less risky situation where market forces do not negate the attractiveness of internal entry is an industry in which not all firms face the same entry costs. If a firm can overcome struc-tural entry barriers into an industry more cheaply than most other potential entrants, or if it can expect less retaliation, a firm can reap above-average profits from entry. The firm also may have special advantages in competing in the industry that outweigh entry bar-riers.

The ability to overcome structural entry barriers more cheaply than other potential entrants usually rests on the presence of assets or skills drawn from the entrant‘s existing businesses or on innova-tions that provide a strategic concept for entry. The firm can look for industries in which it has capability to overcome entry barriers because of proprietary technology, established distribution chan-nels, a recognized and transferable brand name, and so on. If many other potential entrants have the same advantages, then these advan-tages will probably already be reflected in the balance between the cost of entry and the benefits of entry. However, if the firm‘s ability to overcome structural entry barriers is unique or distinctive, the en-try is likely to be profitable. Examples are General Motors’ entry into recreational vehicles, utilizing chassis, engines, and a dealer net-work drawn from its automobile operations; and John Deere’s entry into construction equipment, utilizing manufacturing technology and experience in product design and service drawn from its agricultural equipment business.

A firm might also receive less vigorous retaliation by incum-bents than other potential entrants, either because the firm commanded great respect as a competitor or because its entry was some-how deemed not threatening. The entrant could command respect because of its size and resources or because of its reputation as a fair competitor (or conversely a ruthless one). The entrant might be seen as nonthreatening because of its history of confining its operations to small niches in the market, of not cutting prices, and so on. If the firm has a distinctive advantage in expecting less retaliation for any of these reasons, its expected cost of retaliation will be lower than other potential entrants, and entry can thereby offer potentially above-average profits.


Internal entry will be profitable despite the market forces if the firm has some distinctive ability to change the structural equilibrium in the target industry. If the firm can increase mobility barriers in the industry for subsequent entrants, for example, the structural equilib-rium in the industry will change. The initiator will then be in a posi-tion to reap above-average profits from entry. Also, entry into a fragmented market can sometimes start in motion a process that greatly increases mobility barriers and leads to consolidation, as was discussed in Chapter 9.


Internal entry will be profitable, even in the absence of the con-ditions described above, if it has a beneficial impact on the entrant‘s existing businesses. This impact could occur through the improve-ment of distributor relations, company image, defense against threats, and so on. Thus even if the new business earns an average re-turn, the company as a whole will be better off.

Xerox’s proposed entry into national digital data transmission networks may be an example of entry on this basis.8 Xerox seems to be trying to build a broad base in the “office of the future.” Since data transmission among computers, electronic mail, and elaborate linkage of company locations is likely to be part of this future—as well as conventional copying—Xerox may be trying to protect its ex-isting strong base even though it has no special advantages in the data network business. Another example is Eaton Corporation’s re-cent move into auto repair outlets. As a leading manufacturer of re-pair parts, Eaton has a stake in opening up markets and in keeping business away from the automobile manufacturers’ captive dealer service departments, who use manufacturers’ parts exclusively. Even though Eaton may have no reason to suspect above-average returns in auto repair per se, such an entry can boost its overall returns.


Some common approaches to entry, which rest on various con-cepts for overcoming entry barriers more cheaply than other firms, areas follows:

Reduce Product Costs. Finding a way to produce the product at lower cost than incumbents. Possibilities are (1) an entirely new process technology; (2) a larger plant, reaping greater economies of scale; (3) more modern facilities, incorporating technological im-provements; (4) shared activities with existing businesses that yield a cost advantage.

Buy in with Low Price. Buy into the market by sacrificing re-turns in the short run to force competitors to yield share. The success of this approach depends on competitors’ unwillingness or inability to retaliate in the face of the particular strengths of the entrant.

Offer a Superior Product, Broadly Defined. Offer an innova-tion in product or service that allows the entrant to overcome prod-uct differentiation barriers.

Discover a New Niche. Find an unrecognized market segment or niche which has distinctive requirements the firm can cater to. This move allows the entrant to overcome existing barriers in prod-uct differentiation (and perhaps distribution channels).

Introduce a Marketing Innovation. Find a new way to market the product which overcomes product differentiation barriers or cir-cumvents distributors’ power.

Use Piggybacked Distribution.    Build an entry strategy on es-tablished distribution relationships drawn from other businesses.

2. Entry Through Acquisition

Entry through acquisition is subject to a completely different analytical framework than entry through internal development be-cause acquisition does not add a new firm to the industry in the di-rect sense. As we will see, however, some of the same factors that de-termine the attractiveness of an internal entry will affect a candidate for acquisition.

The critical point is the recognition that the price of an acquisi-tion is set in the market for companies. The market for companies is the marketplace in which owners of companies (or business units) are sellers and acquiring companies are buyers. In most industrialized nations, particularly the United States, the market for com-panies is a very active market in which many companies are bought and sold every year. The market is well organized, involving finders, brokers, and investment bankers all seeking to match buyers and sellers and often reaping large commissions for doing so. The mar-ket has become more organized in recent years as both intermedi-aries and participants have become more sophisticated.9 Intermedi-aries now work actively to generate multiple bidders for selling firms, and multiple bids are common. The market for companies is also a market about which much is written in the press and many sta-tistics are now collected. All these things suggest that the market will function relatively efficiently.

An efficient market for companies works to eliminate any above-average profits from making an acquisition. If a company has sound management and attractive future prospects, its price will be bid up in the market. Conversely, if its future is dim or if it requires massive infusions of capital, its sale price will be low relative to book value. To the extent that the market for companies is working effi-ciently, then, the price of an acquisition will eliminate most of the re-turns for the buyer.

Contributing to the market’s efficiency is the fact that the seller usually has the option of keeping and operating the business. In some situations the seller has compelling reasons to sell and is there-by vulnerable to accepting whatever price the market for companies sets. However, to the extent that the seller has the alternative of op-erating the business it will not rationally sell if the sale price does not exceed the expected present value of continuing to operate the busi-ness. This expected present value puts a floor under the price for the business. The price that results from the bidding process in the mar-ket for companies must exceed this floor, or the transaction will not take place. In practice, the price for the acquisition must significant-ly exceed the floor to give the owners a premium for selling. In to-day’s market for companies, large premiums over market value are the rule rather than the exception.

This analysis suggests that it is quite difficult to win at the ac-quisition game. The market for companies and the seller’s alterna-tive of continuing to operate the business work against reaping above-average profits from acquisitions. Perhaps this is why acquisi-tions so often seem not to meet managers’ expectations, as is sug-gested by much survey evidence. This analysis is also consistent with the conclusions of a number of studies by economists which suggest that the seller, and not the buyer, usually captures most of the spoils from an acquisition.

However, the real power of this analysis lies in directing atten-tion toward the conditions that determine whether or not a particular acquisition will have a good chance of yielding an above-average return. Acquisitions will most likely be profitable if

  1. the floor price created by the seller’s alternative of keeping the business is low;
  1. the market for companies is imperfect and does not elimi-nate above-average returns through the bidding process;
  2. the buyer has a unique ability to operate the acquired business.

It is crucial to note that the bidding process can eliminate the profit-ability of an acquisition even if the floor price is low. Thus favorable conditions in at least two of the areas are necessary for success.


The floor price for an acquisition is set by the seller’s alternative of keeping the business. It clearly depends on the perceptions of the seller, and not the perceptions of buyers or of the market for com-panies. Obviously the floor will be lowest when the seller feels the greatest compulsion to sell, for example, because of the following:

  • the seller has estate problems;
  • the seller needs capital quickly;
  • the seller has lost key management or sees no successors for existing management.

The floor price will also be low if the seller is not optimistic about its prospects if it were to continue to operate the business. The seller may believe its ability to operate the business is inferior to that of buyers if

  • the seller perceives capital constraints to growth;
  • the seller recognizes its manageria weaknesses.


Despite its high level of organization, the market for companies is subject to a variety of imperfections, that is, situations in which the bidding process will not completely eliminate the profits from an acquisition. These imperfections stem from the fact that the market for companies is trading products each of which is unique, that in-formation is highly incomplete, and that buyers and sellers often have complex motives. Imperfections in the market leading to suc-cessful acquisitions will occur in the following situations, among others:

  1. The buyer has superior information. A buyer may be in a better position to forecast favorable future performance from an ac-quisition than other buye It may know the industry or the trends in technology or have insights that other potential bidders do not. In this case the bidding will stop short of eliminating all above-average returns.
  2. The number of bidders is low. The probability that the bid-ding process will not eliminate all the returns from the acquisition is increased if the number of bidders is small. The number may be low if the candidate is an unusual business that would not fit with or be understood by many potential acquirors or if the candidate is very large (and not many buyers can afford it). The way in which the buyer conducts negotiations can discourage the seller from seeking other bidders (“we will not participate in a bidding war”).
  3. The condition of the economy is bad. It appears that the state of the economy affects not only the number of buyers but also what they are willing to Thus a company may reap potentially above-average returns by being willing to deal during economic downturns if it is suffering less than other bidders.
  4. The selling company is There is some evidence that sick companies are more heavily discounted than a true expected-value analysis would suggest, perhaps because acquirors all seem to be looking for sound companies with good management. Thus the number of bidders for sick companies may be lower, as well as the prices they are willing to pay. White Consolidated appears to have successfully taken advantage of this situation by purchasing ailing companies or divisions at below book value and apparently making them profitable.
  1. The seller has objectives besides maximizing the price re-ceived for the Luckily for acquirors, not all sellers try to maximize the price they receive for their business. Since the selling prices of companies are often well in excess of what their owners be-lieve they need for financial well-being, sellers often value other things. Common examples are the name and reputation of the buyer, the way in which the seller’s employees will be treated, whether the seller’s management will be retained, and how much the buyer will interfere in running the business if the owner plans to stay on. Com-panies selling divisions are somewhat less likely to have such noneconomic objectives than are owners or owner-managers selling an en-tire company, although they still can be present.

This analysis suggests that acquirors should look for companies who will have noneconomic objectives and should cultivate these ob-jectives. It also suggests that certain acquirors may have advantages because of the story they can tell sellers. If they can demonstrate good treatment of employees and management of acquisitions in the past, for example, their case with potential sellers will be made more credible. Large prestigious acquirors may also have an edge for similar reasons, since owners want to associate their life’s work (their company) with a blue chip organization.


The buyer can bid more than other buyers and still achieve above-average returns under the following conditions:

  1. The buyer has a distinctive ability to improve the operations of the seller. A buyer with distinctive assets or skills that can im-prove the strategic position of the acquisition candidate can achieve above-average returns from the acquisitio The other bidders, as-suming less improvement of the acquisition in their calculations, will stop bidding before the returns are eliminated. Well-known exam-ples of such acquisitions are Campbell‘s of Vlasic and Gould‘s of ITE.

Possessing the ability to improve the acquisition candidate is not enough in and of itself. This ability must to some degree be dis-tinctive, because if it is not, there are likely to be other firms around who will see the same potential. These firms may keep the bidding going until the returns from making the improvements are elimi-nated by the price.

Entry through acquisition and through internal development are the most similar in this approach. In both cases, the buyer must have some distinctive ability to compete in the new business. In the case of acquisition, the firm is able to outbid others for the candidate and still earn above-average profits. In the case of internal develop-ment, the firm is able to overcome barriers to entry more cheaply than other firms.

  1. The firm buys into an industry that meets the criteria for in-ternal development. Many of the same points about favorable indus-tries made in the context of internal entry can apply here. If the acquiror can use the acquisition as a base from which to change in-dustry structure or to exploit conventional wisdom, or can take ad-vantage of slow or ineffective response by incumbents to strategy changes, for example, possibilities for above-average returns in the industry are good.
  2. The acquisition will uniquely help a buyer’s position in its existing businesses. If the acquisition can add something to bolster the buyer’s position in its existing businesses, the profitability of the acquisition may not be eliminated in the bidding pro A good ex-ample of this logic as a motivation for acquisition is R.J. Reynolds’ recent acquisition of Del Monte. Reynolds has a number of food brands (Hawaiian Punch, Chun King, Vermont Maid, and others) but has failed to achieve significant market penetration for most of them. The acquisition of Del Monte will provide a distribution sys-tem, more clout with food brokers, and entrance into international markets where Reynolds’ existing brands are weak. Even if Del Monte yields only average returns, its positive affect on the rest of Reynolds’ food strategy may mean an above-average return from the transaction.


When bidding for acquisition candidates, it is extremely impor-tant to examine the motives and situation of other bidders. Although bidding will usually stop once above-average returns are eliminated, it is important to recognize that some competing bidders may con-tinue long after, from one firm‘s point of view, the returns are elimi-nated. This might happen for a number of reasons:

  • the bidder sees a unique way to improve the acquisition target;
  • the acquisition will help the bidder’s existing business;
  • the bidder has goals or motives other than the maximization of profit—perhaps growth is the primary objective, the bid-der sees the possibility for a one-shot financial gain, or the bidder desires a firm of the type of the acquisition target because of the idiosyncracies of its management.

In such a case, it is important not to take the willingness of the bidder to raise the price as an indication of the acquisition’s value. A careful analysis of the factors entering into the bidder’s reservation price is indicated.

Source: Porter Michael E. (1998), Competitive Strategy_ Techniques for Analyzing Industries and Competitors, Free Press; Illustrated edition.

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