MERGER AND ACQUISITION

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DEFINITION:
 MERGER:

A merger happens when two firms agree to go forward as a single new

company rather than remain separately owned and operated.

 Example: Company A+ Company B= Company C.

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TYPES OF MERGER:
MERGER

HORIZONTAL CONGLOMERATE VERTICAL

ICICI BANK- ITC

BANK OF RAJASTHAN BANK OF AMERICA- HINDALCO-NOVELIS
HUGES SOFTWARE
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 • ACQUISITION: 4

•When one company takes over another and clearly established itself
as the new owner, the purchase is called an acquisition.

•It also known as a takeover or a buyout, is the buying of one company by

another.

•Example: Company A+ Company B= Company A.

TYPES OF ACQUISITION:

ACQUISITION

FRIENDLY
HOSTILE (WALT DISNEY CORP. &
(ARCELOR-MITTAL) PIXAR ANIMATION)

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DIFFERENCE BETWEEN MERGER AND
ACQUISITION:
MERGER ACQUISITION
i. Merging of two organization in i. Buying one organization by
to one. another.
ii. It is the mutual decision. ii. It can be friendly takeover or
iii. Merger is expensive than hostile takeover.
acquisition(higher legal cost).. iii. Acquisition is less expensive
iv. It is time consuming and the than merger.
company has to maintain so iv. It is faster and easier
much legal issues. transaction.
v. Dilution of ownership occurs in v. The acquirer does not
merger. experience the dilution of
ownership.

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MERGER:WHY & WHY NOT
WHY IS IMPORTANT PROBLEM WITH MERGER
i. Increase Market Share. i. Clash of corporate cultures
ii. Economies of scale ii. Increased business complexity
iii. Profit for Research and iii. Employees may be resistant to
development. change
iv. Benefits on account of tax
shields like carried forward
losses or unclaimed
depreciation .
v. Reduction of competition .

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ACQUISITION:WHY & WHY NOT
PROBLEM WITH
WHY IS IMPORTANT ACQUISITION

i. Increased market share. i. Inadequate valuation of

Increased speed to market target.
ii. Lower risk comparing to ii. Inability to achieve synergy.
develop new products. iii. Finance by taking huge
iii. Increased diversification debt.
iv. Avoid excessive competition

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Amongst BRIC Nations, India second most targeted
country for Mergers & Acquisitions(2010):

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Kraft & Cadburys

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POTENTIAL BUYERS
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Offer
Kraft’s new offer of 850 pence a share
• Cadbury shareholders would also receive a special
dividend of 10 pence a share.
•The offer will consist of 500 pence in cash,
• with the rest made of Kraft shares

Deal
KRAFT acquired CADBURY for 11.5 billion
pounds ($19 billion).
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