Mergers & Acquisitions

Overview

Mergers & Acquisition Differences Types of Mergers Types of Acquisitions The Reasons Behind Mergers & Acquisitions Example of Merger Example of Acquisition

Merger and Acquisition

A Merger is a tool used by companies for the purpose of expanding their operations often aiming at an increase of their long term profitability. An Acquisition, also known as a takeover, is the buying of one company (the target) by another.

Differences
Mergers
Two firms are combined on a relatively co-equal basis

Acquisitions
One firm buys another firm
Existing shares continue to float in market but new shares of those companies are not issued. Can be by means of controlling share, a majority, or all of the target firms stock Can be friendly or hostile

Parent stocks are usually retired and new stock issued Name may be the original or a combination Board of directors of merging companies friendly agree on merger

Types of Mergers

Horizontal Between business competitors Vertical Moving up or down the value chain Conglomerate Unrelated sectors

Types of Acquisitions

Asset Purchase Stock Purchase

Acquisition Procedure
In an acquisition one firm acquires the other, in either a friendly or hostile takeover

Friendly Procedure Unfriendly Procedure

The Reasons Behind Mergers & Acquisitions

Synergies Growth Diversification to Reduce Risk Economies of Scale Taxation Increased Market Share

Example of Merger
NIB Bank Ltd.
NIB Bank Ltd. merged with PICIC and PICIC Commercial Bank on 31 December 2007 Horizontal type NIB Bank Ltd is a subsidiary of Temasek Holdings of Singapore Now NIB Bank is the 7th largest bank of Pakistan with 240 branches Merger with PICIC was in order to expand the business and enhance in innovative products

Example of Acquisition
Standard Chartered

After the acquisition of Union Bank in September 2006, the new entity Standard Chartered Bank (Pakistan) Limited was incorporated in Pakistan on 30 December 2006 as a subsidiary of Standard Chartered PLC. 5th largest bank in Pakistan in terms of profitability and assets.