Presentation on

Merger and
acquisition

Merger & Acquisitions

Mergers and acquisitions (M&A) is one of the main
part of the corporate finance world.
Merger:- A merger occurs when two companies
combine to form a single company.
Merging is nothing but combine to form one
company.
1) Citibank and Traveler's merger = Citigroup.
2) Airtouch + Vodafone's merger = "Verizon"
+

Acquisitions
Acquisitions:- An acquisition, also
known as a takeover, In business, an
acquisition is when one company
purchases another.
Procter & Gamble takeover of Gillette

Reason behind M&A

Revenues: By combining the two companies, we will realize higher

revenues then if the two companies operate separately.

to improve financial performance

Taxation: A profitable company can buy a loss maker to use the target's
loss as their advantage by reducing their tax liability.

Increased revenue or market share: This assumes that the buyer will be
absorbing a major competitor and thus increase its market power (by
capturing increased market share) to set prices.

Economy of scale: This refers to the fact that the combined company can
often reduce its fixed costs by removing duplicate departments or
operations, lowering the costs of the company

Types of mergers
1) Horizontal.
2) vertical.
3)conglomerate.

Horizontal
An horizontal merger result in the
consolidation of firm that are direct rivalsthat is sell direct sell product within
overlapping geographic market. This form
of merger result in the expansion of firms
operation in given line product line and at
the same time eliminates competitor.
Examples:- Boeing Mc-donnell douglas.

Vertical Mergers
When two firms working in different
stages of production or distribution of
same product join together is called
vertical merger.
Examples:- time warner-TBS,Dsnyabc capitol cities.

Conglomerate mergers
Conglomerate mergers involves two firms in totally
unrelated acitvites. Conglomerate may have
operations manufacturing, electronics, banking fast
food reasturant and unrelated business.
Examples:- Cardinal healthcare-Allegiance,citicortraveler insurance.
A simple example would be, a clothing company, like
Aeropostale joining a company that sells jewelry, like
Kay Jewelers.

Types of conglomerate
merger
:-There are two types of conglomerate mergers: pure and
mixed.
Pure conglomerate mergers:When the two companies involved have no direct or
indirect connection or interest, this is referred to as a pure
conglomerate merger.
mixed conglomerate mergers:- It involve firms that
are looking for product extensions or market extensions.
For example, if a company chose to merge with a supplier,
this could be construed as a mixed conglomerate merger,
owing to the former client-vendor connection.

phases of a merger or an
acquisition

phases of a merger or an acquisition

Idea or Preparation identification of urgent need
for M&A:- The idea or preparation phase explains the
need for a merger or an acquisition, which is given by the
company's objectives and desires.
Transaction search of target valuation:- The second
phase includes the search for an appropriate target
company, the valuation, legal and financial negotiation
Integration objectives Measures control:- The last
phase, integration, consists of fusing the two companies
into one.