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Assignment 3: Mergers and Acquisitions, Related, Unrelated. And Geographic diversification

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Homework Assignment #3
Mergers & Acquisitions, Related, Unrelated, and Geographic Diversification
Instructions:
Please complete Section 1 and Section 2.
You do not need to provide citations to any articles, books, websites, videos, or other sources that you use simply to learn more about the organizations or transactions/proposed transactions in this assignment.
Section 1: Analyzing Specific Transactions
For this section, please briefly analyze each transaction/proposed transaction below (A, B, and C) and explain if and why it constitutes:
• Vertical Integration
• Horizontal Integration
• Related Diversification
• Unrelated Diversification
• Geographic Diversification

Please note that a single transaction may be an example of more than one of the above. If this is the case, please be sure to include all of the relevant classifications from the above list.
A. CVS (a retail pharmacy chain) acquires Aetna (a health insurer) (See: https://www(dot)reuters(dot)com/article/us-aetna-m-a-cvs-health-idUSKBN1DX0NC)
B. Amazon (online retailer/cloud computing leader/video & music streaming service) acquires Ring (video doorbell) (See: https://www(dot)cnbc(dot)com/2018/02/27/amazon-buys-ring-the-smart-door- bell-maker-it-backed-through-alexa-fund.html)
C. Hong Kong Exchanges and Clearing Ltd. (owner of the Hong Kong Stock Exchange) bids to purchase the London Stock Exchange (leader in European capital markets) (See: https://www(dot)cnbc(dot)com/2019/09/11/hong-kong-exchanges-and-clearing-proposes-merger-with- lse.html)
Section 2:
In this section, please provide one “real world” example of each of the following:
• Vertical Integration (please provide one example)
• Horizontal Integration (please provide one example)
• Related Diversification (please provide one example)
• Unrelated Diversification (please provide one example)
• Geographic Diversification (please provide one example)
Please explain why each example that you choose constitutes the given classification from the list above.
To assist you in identifying examples from which to choose, the Wikipedia page below (which I have checked for accuracy) includes over 100 of the largest mergers & acquisitions in history with the home country of each company involved in a given transaction.
https://en(dot)wikipedia(dot)org/wiki/List_of_largest_mergers_and_acquisitions

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Mergers and Acquisitions, Related, Unrelated. And Geographic diversification
Section 1
* CVS Health to acquire Aetna for $69 billion in year’s largest acquisition
CVS Health is a health care company that operates numerous drug stores in the U.S. On the other hand, Aetna offers health insurance plans to individuals, families, employers, and health facilities. Therefore, CVS Health acquisition of Aetna is a related diversification strategy because both companies are in the healthcare industry and the acquisition will expand CVS Health products. The transaction indicates that CVS Health will use its low-cost clinics to present medical services to Aetna’s 23 million clients. Therefore, this is also a forward vertical integration strategy because the acquisition allows CVS Health to access new customers.
* Amazon acquires Ring
Amazon acquisition of Ring is an expansion of its e-commerce and digital products. Therefore, the acquisition is both a horizontal integration strategy and related diversification. Both companies are in the technological industry because Ring uses technology to manufacture security products while Amazon is international technology corporation that focuses on cloud computing and e-commerce. Before the acquisition, Ring products were sold on Amazon e-commerce platform. As a result, the acquisition added more products to Amazon’s existing products and enabled it to enter the security market.
* Hong Kong Stock Exchange bids to purchase London Stock Exchange
Hong Kong Stock Exchange bid to purchase the London Stock Exchange presents geographic diversification, related diversification, horizontal integration, and forward vertical integration. The bid is a related diversification because both stock exchanges allow companies to trade their shares on their platforms. Successful acquisition would have resulted into the biggest stock exchange platform in the world, which is a feature of horizontal integration. Aspects of forward vertical integration in the bid related to how the acquisition of London Stock Exchange would have exposed Hong Kong Stock Exchange to new markets, especially in Europe and America. The bid also has aspects of geographic diversification because it involves an Asian stock exchange and European stock exchange. A successful transaction would have reduced the overall risk while increasing returns significantly.
Section 2
* Geographic diversification

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