5.2 Unique features of the acquisition
Even if not yet meeting the huge amount offered by the Chinese competitor, Starwood accepted the new bid submitted by Marriott, evidently finding it profitable enough: for sure, a critical role in the decision is played by the significant long term value that such acquisition can generate. In other words, the potential synergies with Marriott prevailed and persuaded Starwood against the new bidder, as already happened with Hyatt, who also submitted a sweeter bid than Marriott, but was discarded the same. Indeed, Starwood’s aim is to enlarge in order to compensate the weaknesses that were encumbering her performance, especially on limited service markets, where Marriott can fairly claim expertise and ability, and where Hyatt instead suffered problems similar to those of Starwood.
5.3 Consequences on market share and international presence
As observed in the industry analysis, Marriott and Starwood deal would impact upon the hospitality sector market share: even if it will not create the world largest hotel company in terms of number of property, since resulting after Wyndham Hotel Group with 6,000 property. However, in terms of number of rooms Marriott and Starwood represent the number one, with 1.1 million rooms worldwide.
Concering the international presence, Starwood results to have stronger presence in the Middle East, Asia, Oceania and Latin America than Marriott (718 vs. 362 properties). This acquisition will give the opportunity to Marriott to strengthen its presence in Asia, and secondly in Australia and Latin America, where still Starwood dominates. Indeed, in the last years Starwood has been investing in Asia and Marriott can now capitalize on it: as Marriott actual presence in Asia is around 9%, after the deal the number will raise to 15%. Therefore, one of the reasons for Marriott to buy Starwood is to enrich and internationalize its business portfolio through an external strategy rather than committing in the long winding path of doing it internally. 5.3 Potential synergies The transaction is expected to deliver significantly high values to shareholders in the long run, the first estimates expect at least $2.25 billion in dividends and share repurchases just for the first two years. However, as already pointed out, the very drivers of this acquisition are the expectations in terms of future growth and economies of scale. In this sense, this result is also proved by the Marakon’ profitability matrix. Once calculated the ROE and the Ke after the acquisition, we recognized this deal as not very profitable at the current status, as supported by the BCG that classified Starwood as a dog, but with very high potentiality to grow. In fact, according to our computations, ROE < Ke which means less spread and less cash, but since g > G there is an increase in market share. From a rough estimate, since the second year Marriott expects to gain $250 million ($50 million more than in the previous agreement of …show more content…
Furthermore, thanks to asset sales after the transaction, either to continue the asset light strategy of Starwood and to eliminate duplications in the asset structure of the new entity, after-tax proceeds are expected for a value between $1.5 and $2 billion. Other positive returns shall derive from increased efficiencies, especially in activities as reservations, procurements and shared
Even if not yet meeting the huge amount offered by the Chinese competitor, Starwood accepted the new bid submitted by Marriott, evidently finding it profitable enough: for sure, a critical role in the decision is played by the significant long term value that such acquisition can generate. In other words, the potential synergies with Marriott prevailed and persuaded Starwood against the new bidder, as already happened with Hyatt, who also submitted a sweeter bid than Marriott, but was discarded the same. Indeed, Starwood’s aim is to enlarge in order to compensate the weaknesses that were encumbering her performance, especially on limited service markets, where Marriott can fairly claim expertise and ability, and where Hyatt instead suffered problems similar to those of Starwood.
5.3 Consequences on market share and international presence
As observed in the industry analysis, Marriott and Starwood deal would impact upon the hospitality sector market share: even if it will not create the world largest hotel company in terms of number of property, since resulting after Wyndham Hotel Group with 6,000 property. However, in terms of number of rooms Marriott and Starwood represent the number one, with 1.1 million rooms worldwide.
Concering the international presence, Starwood results to have stronger presence in the Middle East, Asia, Oceania and Latin America than Marriott (718 vs. 362 properties). This acquisition will give the opportunity to Marriott to strengthen its presence in Asia, and secondly in Australia and Latin America, where still Starwood dominates. Indeed, in the last years Starwood has been investing in Asia and Marriott can now capitalize on it: as Marriott actual presence in Asia is around 9%, after the deal the number will raise to 15%. Therefore, one of the reasons for Marriott to buy Starwood is to enrich and internationalize its business portfolio through an external strategy rather than committing in the long winding path of doing it internally. 5.3 Potential synergies The transaction is expected to deliver significantly high values to shareholders in the long run, the first estimates expect at least $2.25 billion in dividends and share repurchases just for the first two years. However, as already pointed out, the very drivers of this acquisition are the expectations in terms of future growth and economies of scale. In this sense, this result is also proved by the Marakon’ profitability matrix. Once calculated the ROE and the Ke after the acquisition, we recognized this deal as not very profitable at the current status, as supported by the BCG that classified Starwood as a dog, but with very high potentiality to grow. In fact, according to our computations, ROE < Ke which means less spread and less cash, but since g > G there is an increase in market share. From a rough estimate, since the second year Marriott expects to gain $250 million ($50 million more than in the previous agreement of …show more content…
Furthermore, thanks to asset sales after the transaction, either to continue the asset light strategy of Starwood and to eliminate duplications in the asset structure of the new entity, after-tax proceeds are expected for a value between $1.5 and $2 billion. Other positive returns shall derive from increased efficiencies, especially in activities as reservations, procurements and shared