Mergers and Acquisitions as a tool for value creation: the acquisition of GrandVision by EssilorLuxottica.

Abstract

In a context characterised by continuous and intense market evolutions, companies operating in it are strongly affected by these changes and, to maintain a certain competitive advantage, they undergo profound transformations both from an organisational and a behavioural point of view. As consequence, they look for new and more efficient strategies to cope with such a changeable operating environment. The main operations that characterise such a dynamic economy are Mergers and Acquisitions: external growth strategies that many organisations are required to adopt due to the increasingly intense competition, the effects of globalisation and the continuous technological development. Most companies, indeed, do not have the necessary resources to maintain their competitive advantage, this leads to the need to look outside their organisational boundaries, seeking to increase their value through strategic alliances or partnerships. This paper analyses more in detail M&A operations, that are nowadays one of the most valuable tools for companies to accomplish external growth and create new value for the organisation itself. Such transactions fall under the heading of extraordinary finance, although they are increasingly widespread within corporate strategic planning. This is due to the fact that they have often represented the most effective and efficient way of entering new market segments or simply defending oneself against competition, keeping up with technological progress. The objective of this paper, therefore, is to give a detailed description of M&A dealings, highlighting how companies, with the purpose of creating value and gaining a competitive advantage, tend more and more to implement these transactions in their business strategies. In particular, the carried-out work aims to analyse the acquisition of GrandVision by the eyewear and eyecare colossus EssilorLuxottica, one of the most important M&A transactions on the European scene in recent years, by performing a valuation of the target company in order to calculate through the Discounted Cash Flow (DCF) method and the multiples method, the Price per Share of GrandVision. Through a careful analysis, this dissertation will finally assess whether the price paid by EssilorLuxottica was in line with GrandVision's fair value.