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Mergers and Acquisitions

Mergers and Acquisitions

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Published by bizzpakistan

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Published by: bizzpakistan on Aug 21, 2009
Copyright:Attribution Non-commercial

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11/24/2012

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11
Mergers and AcquisitionsMergers and Acquisitions
Basic terms and definitions concerningBasic terms and definitions concerningmergers and acquisitionsmergers and acquisitions
Reasons for mergers and acquisitionsReasons for mergers and acquisitions
Real world empirical observationsReal world empirical observations
An example of valuing a potentialAn example of valuing a potentialacquisitionacquisition
 
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Mergers and AcquisitionsMergers and Acquisitions
 
Merger:M
 
erger:
One firm absorbs the assets andOne firm absorbs the assets andliabilities of the other firm in a merger. Theliabilities of the other firm in a merger. Theacquiring firm retains its identity. In many cases,acquiring firm retains its identity. In many cases,control is shared between the two managementcontrol is shared between the two managementteams. Transactions were generally conducted onteams. Transactions were generally conducted on
friendly friendly 
terms.terms.
 
In aIn a
consolidationconsolidation
, an entirely new firm is created., an entirely new firm is created.
 
Mergers must comply with applicable state laws.Mergers must comply with applicable state laws.Usually, shareholders must approve the merger by aUsually, shareholders must approve the merger by avote.vote.
 
33
Mergers and AcquisitionsMergers and Acquisitions
 
Acquisition:
 
Acquisition:
Traditionally, the term described aTraditionally, the term described asituation when a larger corporation purchases thesituation when a larger corporation purchases theassets or stock of a smaller corporation, whileassets or stock of a smaller corporation, whilecontrol remained exclusively with the larger control remained exclusively with the larger corporation.corporation.
 
Often a tender offer is made to the target firm (Often a tender offer is made to the target firm (
friendly friendly 
))or directly to the shareholders (often aor directly to the shareholders (often a
hostilehostile
takeover).takeover).
 
Transactions that bypass the management areTransactions that bypass the management areconsidered hostile, as the target firm’s managers areconsidered hostile, as the target firm’s managers aregenerally opposed to the deal.generally opposed to the deal.

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