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Merger

Merger

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detailed information about merger and acquisition here. read and enjoy. please post your valuable commands for me... yours friend: terror650.
detailed information about merger and acquisition here. read and enjoy. please post your valuable commands for me... yours friend: terror650.

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Published by: Suresh Kumar manoharan on Sep 13, 2009
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MergersMerger is a financial tool that is used for enhancing long-term profitability byexpanding their operations. Mergers occur when the merging companies have theirmutual consent as different from acquisitions, which can take the form of ahostile takeover.The business laws in US vary across states and hence the companies have limitedoptions to protect themselves from hostile takeovers. One way a company canprotect itself from hostile takeovers is by planning shareholders rights, which isalternatively known as poison pill. If we trace back to history, it is observed
 that very few mergers have actually added to the share value of the acquiringcompany. Corporate mergers may promote monopolistic practices by reducing costs,taxes etc.Such activities may go against public welfare. Hence mergers are regulated dsupervised by the government, for instance, in US any merger required\s the priorapproval of the Federal Trade Commission and the Department of Justice. In USregulation son mergers began with the Sherman Act in 1890.Mergers may be horizontal, vertical, conglomerate or congeneric, depending or thenature of the merging companies.AcquisitionsAcquisitions or takeovers occur between the bidding and the target company. Theremay be either hostile or friendly takeovers. Reverse takeover occurs when thetarget firm is larger than the bidding firm. In the course of acquisitions thebidder may purchase the share or the assets of the target company.History of Mergers and AcquisitionsTracing back to history, merger and acquisitions have evolved in five stages andeach of these are discussed here. As seen from past experience mergers andacquisitions are triggered by economic factors. The macroeconomic environment,which includes the growth in GDP, interest rates and monetary policies play a keyrole in designing the process of mergers or acquisitions between companies ororganizations.First Wave MergersThe first wave mergers commenced from 1897 to 1904. During this phase mergeroccurred between companies, which enjoyed monopoly over their lines of productionlike railroads, electricity etc. the first wave mergers that occurred during theaforesaid time period were mostly horizontal mergers that took place between heavymanufacturing industries.End Of 1st Wave MergerMajority of the mergers that were conceived during the 1st phase ended in failuresince they could not achieve the desired efficiency. The failure was fuelled bythe slowdown of the economy in 1903 followed by the stock market crash of 1904.The legal framework was not supportive either. The Supreme Court passed themandate that the anticompetitive mergers could be halted using the Sherman Act.Second Wave MergersThe second wave mergers that took place from 1916 to 1929 focused on the mergersbetween oligopolies, rather than monopolies as in the previous phase. The economicboom that followed the post world war I gave rise to these mergers. Technologicaldevelopments like the development of railroads and transportation by motorvehicles provided the necessary infrastructure for such mergers or acquisitions totake place. The government policy encouraged firms to work in unison. This policywas implemented in the 1920s.The 2nd wave mergers that took place were mainly horizontal or conglomerate innature. Te industries that went for merger during this phase were producers of
 
primary metals, food products, petroleum products, transportation equipments andchemicals. The investments banks played a pivotal role in facilitating the mergersand acquisitions.End Of 2nd Wave MergersThe 2nd wave mergers ended with the stock market crash in 1929 and the greatdepression. The tax relief that was provided inspired mergers in the 1940s.Third Wave MergersThe mergers that took place during this period (1965-69) were mainly conglomeratemergers. Mergers were inspired by high stock prices, interest rates and strictenforcement of antitrust laws. The bidder firms in the 3rd wave merger weresmaller than the Target Firm. Mergers were financed from equities; the investmentbanks no longer played an important role.End Of The 3rd Wave MergerThe 3rd wave merger ended with the plan of the Attorney General to splitconglomerates in 1968. It was also due to the poor performance of theconglomerates. Some mergers in the 1970s have set precedence. The most prominentones were the INCO-ESB merger; United Technologies and OTIS Elevator Merger arethe merger between Colt Industries and Garlock Industries.Fourth Wave MergerThe 4th wave merger that started from 1981 and ended by 1989 was characterized byacquisition targets that wren much larger in size as compared to the 3rd wavemergers. Mergers took place between the oil and gas industries, pharmaceuticalindustries, banking and airline industries. Foreign takeovers became common withmost of them being hostile takeovers. The 4th Wave mergers ended with antitakeover laws, Financial Institutions Reform and the Gulf War.Fifth Wave MergerThe 5th Wave Merger (1992-2000) was inspired by globalization, stock market boomand deregulation. The 5th Wave Merger took place mainly in the banking andtelecommunications industries. They were mostly equity financed rather than debtfinanced. The mergers were driven long term rather than short term profit motives.The 5th Wave Merger ended with the burst in the stock market bubble.Hence we may conclude that the evolution of mergers and acquisitions has been longdrawn. Many economic factors have contributed its development. There are severalother factors that have impeded their growth. As long as economic units ofproduction exist mergers and acquisitions would continue for an ever-expandingeconomy.Merger and Acquisition TrendsTrend essentially refers to the observed long-term movement in a time series data.Trend estimates are seasonally adjusted through an averaging process. Merger andacquisition trends provide an idea about the market movements.Merger and acquisition trends are seen to affect an economy's product market,money market, and labor market. Global markets are also considerably influenced bythe merger and acquisition trends.Global Merger and Acquisition Trends for 2006 and 20072007 and 2006 were marked by a spate of mergers and acquisitions all over theglobe in both developing and developed countries. The general trend was that,there was a decline in the number of public sector undertakings along with a hikein the number of private sector enterprises. This was due to the fact that manypublic sector organizations worldwide were either acquired by large private sectorenterprises or merged with them.The explanation to this merger and acquisition trend as observed in 2006 and 2007lay in the robust growth recorded by the Private Equity Funds. The other factorspropelling this trend were the emphasis on short term earnings growth and the
 
strict regulatory structure of public sector enterprises.This merger and acquisition trend towards increased privatization of public sectorholdings was observed in Europe, Brazil, North America, and China. Europe in thatperiod hosted a strong investment market, which catered to the public to privatesector transition of companies.For China mergers and acquisitions from public to private business enterprises gotgovernment approval in 2006.More on Private Equity Driven International Merger and Acquisition TrendsPrivate equity transactions had been the buzzword for the world economy in 2007and 2006. The real estate sector and the energy sector witnessed much of this typeof activity. Private equity firms were working overnight for augmentingproprietary deal flows.China was an unique case in point. There the powerful trend towards mergers andacquisitions involving private equity dealings comprised a lot of policy andregional diversity. A great amount of equity capital flowed into China from US,Japan, Israel, and Europe as retail sector investments. This was primarily aimedat tapping China's heightened domestic consumer demand. Focus shifted to thenorthern and western regions of China as costs escalated for the commercial hubsalongside the eastern seacoast.In the US, private equity funds succeeded in raising more than $200 billion inthis period for international merger and acquisition dealings.As these types of funds usually possessed a time frame of 3 to 5 years for puttingthe new invested capital to work, they were expected by the analysts to powerheightened merger and acquisition activities across major global markets for thecoming decade.For Europe the general prediction was that of a high transactional demand relatedto private equity. Analysts observed that certain European markets werecharacterized by different financial advantages and tax structures. WesternEuropean nations possessed well oiled legal machinery and conducive investmentclimates. In particular Britain exhibited a strong market for public to privateinvestments.After the accession of nations like Poland, Czech Republic and Hungary into theEU, a section of European funds for private equity were seen to be abstaining fromapplying the 'emerging market discount' for investment in those nations.Equity investment in Brazil turned attractive with the program called NovoMercado. Brazilian pension funds turned out to be a prime investment force. Theirbankruptcy code got a revision. The elected government was supportive of a freemarket structure.In North America domestic dealings in M&A executed by private equity investors ofUSA displayed a robust international component. The observed trend was that amajority of the funds wanted to secure offshore partners for distribution,contract manufacturing or joint ventures.This kind of cross-border transactions entailed a careful planning for taxobligations arising out of fund repatriation.More on Merger and Acquisition Trends

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