maergers & aquisition

8/11/2019 maergers & aquisition

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WELL COME


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MERGERS AND ACQUISITIONS

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Merger a combination of two or morebusinesses under one ownership

Acquisition or Takeover - one firm acquiresthe stock of another Acquired firm is thetarget

Consolidation - combining firms dissolveforming a new legal entity


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FIGURE 17-1 BASIC BUSINESS COMBINATIONS

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Relationships Consolidation implies the firms combined

willingly

Acquisition can be a friendly or hostile takeover Stockholders

Must be willing to give up their shares for theoffered price

Approval from majority necessary foracquisition to be successful


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Friendly Procedure Target firm's

management approves

and cooperates withacquiring company Negotiation occurs

until agreement is

reached Proposal submitted

for stockholder vote

Unfriendly Procedure Target firm's

management resists,

takes defensivemeasures to stoptakeover

Acquiring firm makes

a tender offer to thetarget's shareholders


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ECONOMIC CLASSIFICATION OFBUSINESS COMBINATIONS

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Vertical Merger Acquiring suppliers of customers

Horizontal Merger Merging firms are competitors

Congeneric Merger Firms are in related but not competing businesses

Conglomerate Merger Firms are in entirely different fields


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A FURTHER CLASSIFICATION Strategic Merger

Merger is undertaken to enhance the

acquirers business position Financial Merger

Merger is undertaken to make money fromthe merger process


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THE REASONS BEHIND MERGERS

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Synergies Combined performance is expected to be better than the

sum of the separate performances Usually cost saving or marketing opportunities

Growth External growth through acquisition is faster than

internal growth Diversification to Reduce Risk

Collection of diverse businesses less risky than a singleline

Variations in different business lines offset each other


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THE REASONS BEHIND MERGERS

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Economies of Scale Guaranteed Sources and Markets Acquiring Assets Cheaply Tax benefits. Ego and Empire


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MEGAMERGERS SINCE THE 1980SCompanies Year Industry $ Size

Citicorp and Travelers 1988 Financial Services $140 billion

MCI and WorldCom 1998 Telecom $ 37 billion

Daimler-Benz and Chrysler 1998 Automotive $ 75 billion

AOL and Time Warner 2000 Media and Entertainment $ 350 billion

Hewlett-Packard and Compaq 2001 Computer hardware $ 25 billion


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TASHI DELEK.

Presented By-

Sonam PenjorII MIB.

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maergers & aquisition