Mergers and Acquisitions

11 Key excerpts on "Mergers and Acquisitions"

• 

  No longer available |Learn more

  Corporate Finance, Law and Governance

  • (Author)
  • 2014(Publication Date)
  • College Publishing House

    (Publisher)

  _____________WORLD TECHNOLOGIES_____________ Chapter- 3 Mergers and Acquisitions Mergers and Acquisitions (abbreviated M&A ) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can aid, finance, or help an enterprise grow rapidly in its sector or location of origin or a new field or new location without creating a subsidiary, other child entity or using a joint venture. The distinction between a merger and an acquisition has become increasingly blurred in various respects (particularly in terms of the ultimate economic outcome), although it has not completely disappeared in all situations. Acquisition An acquisition is the purchase of one business or company by another company or other business entity. Consolidation occurs when two companies combine together to form a new enterprise altogether, and neither of the previous companies survives independently. Acquisitions are divided into private and public acquisitions, depending on whether the acquiree or merging company (also termed a target) is or is not listed on public stock markets. An additional dimension or categorization consists of whether an acquisition is friendly or hostile . Achieving acquisition success has proven to be very difficult, while various studies have shown that 50% of acquisitions were unsuccessful. The acquisition process is very complex, with many dimensions influencing its outcome. Whether a purchase is perceived as being a friendly one or a hostile depends significantly on how the proposed acquisition is communicated to and perceived by the target company's board of directors, employees and shareholders. It is normal for M&A deal communications to take place in a so-called 'confidentiality bubble' wherein the flow of information is restricted pursuant to confidentiality agreements.

  Sign up to read

  Learn more about book
• 

  No longer available |Learn more

  Corporate Finance Handbook

  • (Author)
  • 2014(Publication Date)
  • Library Press

    (Publisher)

  ____________________ WORLD TECHNOLOGIES ____________________ Chapter- 3 Mergers and Acquisitions Mergers and Acquisitions (abbreviated M&A ) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can aid, finance, or help an enterprise grow rapidly in its sector or location of origin or a new field or new location without creating a subsidiary, other child entity or using a joint venture. The distinction between a merger and an acquisition has become increasingly blurred in various respects (particularly in terms of the ultimate economic outcome), although it has not completely disappeared in all situations. Acquisition An acquisition is the purchase of one business or company by another company or other business entity. Consolidation occurs when two companies combine together to form a new enterprise altogether, and neither of the previous companies survives independently. Acquisitions are divided into private and public acquisitions, depending on whether the acquiree or merging company (also termed a target) is or is not listed on public stock markets. An additional dimension or categorization consists of whether an acquisition is friendly or hostile . Achieving acquisition success has proven to be very difficult, while various studies have shown that 50% of acquisitions were unsuccessful. The acquisition process is very complex, with many dimensions influencing its outcome. Whether a purchase is perceived as being a friendly one or a hostile depends significantly on how the proposed acquisition is communicated to and perceived by the target company's board of directors, employees and shareholders. It is normal for M&A deal communications to take place in a so-called 'confidentiality bubble' wherein the flow of information is restricted pursuant to confidentiality agreements.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Organizational Psychology of Mergers and Acquisitions

  Examining Leadership and Employee Perspectives

  • Camelia Oancea, Caroline Kamau(Authors)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  1  Understanding and classifying different types of Mergers and Acquisitions

  This chapter will introduce you to different types of Mergers and Acquisitions, helping you understand the reasons that inspire organizations to engage in them. A merger or acquisition is a legal transaction in which one organization transfers or combines some or all of its operations to or with another organization. In an acquisition, one organization transfers operations “upwards” to another organization that becomes its legal “parent.” In a merger, two organizations transfer “sideways” to a new organization that is the sum of its two parts and they often rebrand the name of the organization with a new name, a hyphenated name, or one of the two organizations’ names. By “operations” we mean an organization’s stock (e.g. products to sell to customers), assets (e.g. buildings, equipment, vehicles, or staff), liabilities (e.g. debts), and equity (e.g. net profit). This chapter will start by discussing commonly used words in mergers or acquisitions to extrapolate what different words really mean and whether they are useful or superfluous (not necessary). We will discuss ways in which the media and public sometimes confuse mergers with acquisitions, and how organizations sometimes misrepresent acquisitions as mergers because acquisitions are stereotyped as “hostile” whereas mergers are stereotyped as “friendly.” We will then discuss five types of mergers, with examples from real organizations that have combined their brands and operations in such deals. We will discuss horizontal mergers, market extension mergers, vertical mergers, product extension mergers, and conglomerate mergers, and we will briefly discuss the psychological implications for employees as an introduction to this book. After this, we will present a new taxonomy defining different types of acquisitions in 15 ways, with examples from organizations that have embarked on such deals. We will also draw some conclusions about the psychological implications of acquisitions for employees as an introduction to this book. Finally, we will summarise the conclusions you can draw from this chapter. Let us start by understanding what Mergers and Acquisitions are and how they differ.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Strategic Business Planning for Accountants

  Methods, Tools and Case Studies

  • Dimitris N. Chorafas(Author)
  • 2006(Publication Date)
  • CIMA Publishing

    (Publisher)

  17 Mergers, Acquisitions, Takeovers and Their Deliverables 460 This page intentionally left blank Strategic Business Planning for Accountants 461 1. Introduction Quoting E.M. Forster’s Howard’s End : ‘It is a vice of vulgar mind to be thrilled by bigness.’ Mergers and Acquisitions (M&As) make the acquiring company bigger than it used to be, but not necessarily richer or better managed. Yet, M&As have merits, provided the proper homework preceded them. Generally, there are dif-ferent forms of mergers: Horizontal: this is the case of two firms in the same business. Vertical: As happens when one firm is a supplier of the other. Conglomerate: usually product lines featured by the merging firms are unrelated. Merger waves happen from time to time. Examples are those that took place at the turn of the 19th to the 20th century, the 1920s, 1967–9, 1980s, and 1990s. Some, though by no means all, M&As play an important role in business and industry, pro-viding the means of consolidation and/or renewal. Mergers might be successful if the merging entities appreciate their aftermath, which may be at the same time: Product-oriented Market-oriented Political and social. M&A history shows that corporate buyers usually overpay. This applies particu-larly to technology companies and mergers made for prestige or ego reasons. For instance, telecoms providers’ market valuations are judged more on their per-ceived strength in service provision and their ability to migrate corporate cus-tomers to higher value services, than an objective evaluation on current fair value would have suggested (telecoms mergers are discussed in Chapter 18). In the oil industry, too, an overriding reason for M&As has been size, though the acquisition of proven oil and gas resources is a potent reason, too. A study by Bloomberg suggests that returns are about four times as great on extracting oil from the ground than on refining it.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Mergers and Acquisitions Security

  Corporate Restructuring and Security Management

  • Edward Halibozek, Gerald L. Kovacich(Authors)
  • 2005(Publication Date)
  • Butterworth-Heinemann

    (Publisher)

  Chapter 1 What Are Mergers and Acquisitions? The first rule of life is also the first rule of business: Adapt or die. – Alan M. Weber INTRODUCTION This chapter explains the different types of Mergers and Acquisitions. For a security professional to fully understand why Mergers and Acquisitions are important, they first must understand what they are and why they occur. As supporting evidence, trend data are presented, helping to explain why so many Mergers and Acquisitions occurred over the past decade. Moreover, the security professional needs to understand why Mergers and Acquisitions are important to any business, the executives that manage the business, and the investors who own the business. As with any element of a business, it is easier to provide an appropriate level of protection if the protectors—the security professionals—understand what company assets they are protecting and why they need to protect them. Black’s Law Dictionary defines Mergers and Acquisitions as the following: ● Merger: The union of two or more corporations by the transfer of property of all, to one of them, which continues in existence, the others being swallowed up or merged therein. . . . ● Acquisition: The act of becoming the owner of a certain property. . . ● Divestiture: to deprive; to take away; to withdraw 3 TYPES OF MERGERS, ACQUISITIONS, AND DIVESTITURES Beyond the definitions provided above from Black’s Law Dictionary , what are mergers, acquisitions, and divestitures? In a very basic sense, they are the purchase of a company, in whole or in part, or the sale of a company, in whole or in part. Each transaction differs in size and complexity. Some transactions are very large, involving whole companies and billions of dol-lars, sometimes referred to as mega-mergers. Some transactions are very small, perhaps involving only the purchase of a product line, a start-up company, or a new technology, often gaining little notice or attention.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Recent Trends in Social and Behaviour Sciences

  Proceedings of the International Congress on Interdisciplinary Behaviour and Social Sciences 2013

  • Ford Lumban Gaol, Seifedine Kadry, Marie Taylor, Pak Shen Li(Authors)
  • 2014(Publication Date)
  • CRC Press

    (Publisher)

  1 INTRODUCTION In practice acquisition refers to the procurement of one company by other. The company being bought is known as Target Company and the other is called Acquirer this results in transferring off control of all the assets of Target Company to Acquiring Company. Mergers happen when two or more companies agree to transfer control of their assets to single entity, which may result in birth of new company.There are so many complexities and conflict of interests that it is very hard to identify the Target and Acquirer companies and same holds for Mergers and Acquisitions. In this paper the whole field is addressed as Mergers and Acquisitions (M&A) to avoid potential confusion and unproductive arguments (Agrawal & Jaffe, 2000). In theory the main role of the managers of the any firms is to act in the best interest of shareholders by adapting the strategies and abiding by the mechanism of market for corporate control. In real world this the-oretical concept somewhat fails to materialise when management of the many companies fails to max-imise shareholders wealth it means that they failed to achieve their primary objective. This creates a vac-uum which is usually filled by outsiders via take steps to replace existing management by the process of Mergers & Acquisition. After Mergers or Acqui-sitions share holder of the business tend to revalue their current and future cash flows along with capi-tal gains under new management. The main reason is that market and shareholders expectations are mostly positive. This fact is mostly exploited by the managers for their personal gains. One of the real life examples is the CEO of Merrill Lynch; John Thain spent $1.20 million on decoration of his office while USA’s first family spent one hundred thousand doing same thing (Amel et al., 2004). This opinion is also backed by Denis and McConnell who suggest negative effects of takeovers on NPV, which result in diminishing returns from projects.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Mergers and Acquisitions

  The Critical Role of Stakeholders

  • Helén Anderson, Virpi Havila, Fredrik Nilsson, Helén Anderson, Virpi Havila, Fredrik Nilsson(Authors)
  • 2012(Publication Date)
  • Taylor & Francis

    (Publisher)

  This type of situation may influence the acquiring and the target companies' relationships in a radical way. For example, relationships with suppliers and customers of the merging/acquiring companies may be terminated because of the merger/acquisition (Havila and Salmi 2000; Salmi, Havila, and Anderson 2001). On the other hand the companies' relationships may stay unchanged. The reason may be management skills in handling the situation or the view of stakeholders that they need not react if business continues as usual. All in all, this means that a merger or an acquisition is always challenging for management (Bower 2001).

  As we focus on a context with at least two companies, it will always be necessary to consider stakeholders of the same stakeholder category in both the acquiring and target company. To illustrate the multiplicity and diversity of stakeholder relationships during a merger or an acquisition, we apply a multi-stakeholder approach . We argue that a merger or an acquisition involves several stakeholder groups of both the acquirer and the target company. These stakeholder groups perceive the pro's and con's from their own perspective and thus act and react accordingly. Their stakes are unlikely to be the same. Further, they will probably evaluate the benefits and drawbacks of the merger process, and thus the changing stakes, in different ways.

  Figure 1.1 A merger or an acquisition involves at least two companies.

  Mergers and Acquisitions: FREQUENT STRATEGIC ACTIVITIES

  Although the number of Mergers and Acquisitions seems to increase and decrease in waves (Martynova and Renneboog 2008; Shleifer and Vishny 1991), they have always been common and frequently studied. For example, according to Cartwright and Schoenberg (2006), an acquisition was made every 18 minutes all year around in 2004. Normally no business day ends without news of a merger or an acquisition in the media. It may be rumours of well-known global companies acquiring shares in each other, or it may emanate from a press conference where the CEO and the chairperson announce a merger. Whether the information is based on facts or just rumours, it still makes the headlines. The reason is simple: few other decisions and actions by shareholders, boards of directors and top management have such an impact on the company's future, on market structure and on shareholder value. Researchers who focus on mergers between two (or more) companies, or on acquisitions where the acquiring company acquires a substantial part of the shares in the target company, often see the merger/acquisition as a strategic step. In this introductory chapter, we present a brief overview of this broad field of research.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Organizational Justice in Mergers and Acquisitions

  Antecedents and Outcomes

  • Nicholas Jackson(Author)
  • 2018(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Part I Mergers and Acquisitions Passage contains an image

  © The Author(s) 2019 Nicholas Jackson Organizational Justice in Mergers and Acquisitions https://doi.org/10.1007/978-3-319-92636-0_1

  Begin Abstract

  1. Introduction

  Nicholas Jackson

  1   

  (1) Leeds University Business School, Leeds, West Yorkshire, UK

   

    Nicholas Jackson

  End Abstract

  1.1 Emerging Patterns and Trends

  The popularity of Mergers and Acquisitions (M&A) as a development strategy has increased significantly over the past 25 years, due in part to an ongoing pressure for organizations and companies to continuously renew and change themselves in an attempt to remain competitive and innovative. When considering opportunities for growth, Johnson, Scholes, and Whittington (2011 ) define three forms of developmental strategy for organizations: internal development, acquisition, and alliances. In comparison to other developmental growth strategies, Horwitz et al. (2002 ) recognize that M&A can offer an enticing range of competitive advantages that organic growth cannot achieve. They cite as major advantages the acquisition of new capabilities and resources in addition to the potentially unrivaled opportunity for costcutting. Furthermore, they provide greater control than the alternative options of licensing or forming alliances (King, Dalton, Daily, & Covin, 2004 ). It is therefore recognized that this form of integration has potential to offer several benefits for organizations and when compared to alternative strategies, such as organic growth or an alliance, the ability to grow the organization with an almost immediate effect.

  If we consider merger trends over recent times, both the number of deals and financial value show the growth pattern which corresponds with a period of increasing economic globalization and significant rises in foreign direct investment. Within this context of globalization and subsequent intensification of competitiveness, M&A became the dominant mode of firm growth in the 1980s and 1990s for both European and U.S. firms (see Capron, 2004 ; Berggren, 2003 ; Hayward, 2002 ). In part recognition of this, there is a considerable body of research that examines M&A and their consequences. As Fig. 1.1 shows, there was a substantial increase during the period 1998–2000 and then an equally rapid decline during the years 2001–2003. This coincides with a period of considerable economic expansion and subsequent contraction in global markets and corporate valuations. The incline continued again in 2004 until 2007 when, due to the global financial crisis in the following year, there was a severe decline in corporate valuations. It is noticeable that even so, after an initial decline, the number of deals has continued in strength.

  Fig. 1.1

  Global merger and acquisition deals. (Note: Based on data presented by Thomson One Banker (2017

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Experience and Learning in Corporate Acquisitions

  Theoretical Approaches, Research Themes and Implications

  • Ilaria Galavotti(Author)
  • 2018(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  © The Author(s) 2019 Ilaria Galavotti Experience and Learning in Corporate Acquisitions https://doi.org/10.1007/978-3-319-94980-2_3

  Begin Abstract

  3. Mergers and Acquisitions as Strategic Decisions

  Ilaria Galavotti

  1   

  (1) Università Cattolica del Sacro Cuore, Piacenza, Italy

   

    Ilaria Galavotti

  End Abstract

  3.1 Mergers and Acquisitions Among Strategic Decisions: Distinctive Characteristics

  The argument that the firm, rather than being considered as just an autonomous administrative unit, should rather be regarded as a collection of productive resources, whose disposal and allocation depend upon administrative decisions, dates back to Penrose’s Theory of the Growth of the Firm (1959 ). In her seminal work, she emphasizes that the long-term profitability of the firm is closely related to the growth opportunities that allow a more efficient use of resources, that is, both tangible and intangible assets semi-permanently tied to the firm.

  Mergers and Acquisitions (M&A) are considered among the most important strategic decisions for resource allocation (Wally and Robert Baum 1994 ), but, compared to other investment decisions, they show peculiar risk characteristics in virtue of their huge resource requirements and their considerable performance implications (Haspeslagh and Jemison 1991 ).

  A first distinctive characteristic of acquisitions compared to other resource

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  How to Be an Investment Banker

  Recruiting, Interviewing, and Landing the Job

  • Andrew Gutmann(Author)
  • 2013(Publication Date)
  • Wiley

    (Publisher)

  Now let's put our investment banker hat back on. That many deals wind up destroying shareholder value instead of creating it is of utmost importance to management teams, to asset managers, and to hedge fund analysts. But not to investment bankers. We do not talk about this subject when we pitch M&A deals. Always remember that, to a banker, all deals are good deals. So forget what you just learned until you are working on the buy side.

  Mechanics of M&A

  In this section, we will talk about the mechanics of an M&A transaction. In order words, what are the legal ways in which a company can actually buy another company? This is a topic that is highly specialized and, in a real transaction, best left to the M&A attorneys. However, as a banker, you should have at least a very basic understanding of the mechanics for how an acquisition is effectuated.

  We can categorize the ways in which to acquire a company into three types. An acquirer can do a merger, pursue a tender offer, or purchase assets. The first two of these types involve a company buying the equity or shares of the target. Normally the goal is to acquire 100 percent of the outstanding shares. In the third method, the acquirer purchases only assets from the target and not shares. Whether a company buys equity or buys assets has a number of tax consequences, which we will also briefly mention.

  Before we continue there is one final clarification worth making. As we have in this book, and as is customary in the industry, we use the term “Mergers and Acquisitions” (or M&A) to classify any transaction whereby one company mergers with or acquires another. Beyond the legal differences, a few of which we will discuss, there are no practical differences between a merger and an acquisition from the standpoint of an investment banker.

  Merger

  A merger (also known as a single-step or one-step merger) is a type of transaction whereby the acquirer purchases the stock of the target from the target's shareholders. For reasons that should become obvious, a merger is generally used in friendly transactions and not for hostile or unsolicited deals.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Investment Banking

  Valuation, LBOs, M&A, and IPOs

  • Joshua Rosenbaum, Joshua Pearl(Authors)
  • 2021(Publication Date)
  • Wiley

    (Publisher)

  BUYER MOTIVATION The decision to buy another company (or assets of another company) is driven by numerous factors, including the desire to grow, improve, and/or expand an existing business platform. In many instances, growth through an acquisition represents a cheaper, faster, and less risky option than building a business from scratch. Greenfielding a new facility, expanding into a new geographic region, and/or moving into a new product line or distribution channel is typically more risky, costly, and time-consuming than buying an existing company with an established business model, infrastructure, and customer base. Successful acquirers are capable of fully integrating newly purchased companies quickly and efficiently with minimal disruption to the existing business. Acquisitions typically build upon a company’s core business strengths with the goal of delivering growth and enhanced profitability to provide higher returns to shareholders. They may be undertaken directly within an acquirer’s existing product lines, geographies, or other core competencies (often referred to as “bolt-on acquisitions”), or represent an extension into new focus areas. For acquisitions within core competencies, acquirers seek value creation opportunities from combining the businesses, such as cost savings and enhanced growth initiatives. At the same time, acquirers need to be mindful of abiding by antitrust legislation that prevents them from gaining too much share in a given market, thereby creating potential monopoly effects and restraining competition. 2 Mergers Consequences Analysis calculates the pro forma effects of a given transaction on the acquirer or merging party, including impact on key financial metrics such as earnings and credit statistics. Buy-Side M&A 333 Synergies Synergies refer to expected cost savings, growth opportunities, and other financial benefits that occur as a result of the combination of two companies.

  Sign up to read

  Learn more about book