MERGERS AND ACQUISITIONS

Mergers and acquisitions (M&A) is one of the main part of the corporate finance
world. The aim is to create a bigger company by taking at least two separates
companies. Deals can be worth millions of dollars, even billion sometimes (such
as the merger between Microsoft and Yahoo! for approximately $44.6 billion).

We often say that the perfect equation for a merger or an acquisition is one plus
one makes three. The key principle behind buying a company is to create more
value for the shareholders. Two companies together are normally stronger than
two companies separate. Both bring its know-how, experience, culture and so
on.

There are different reasons why two companies decide to merger or to make an
acquisition. It could be because they want to create a more competitive, cost-
efficient company, to reduce their costs, for economies of scale reasons as well.
Sometimes they know that they can complementary, meaning by merging they
can take advantage of both know-how and create a better product because only
one company cannot make it by its own.

It is important also, before giving some examples of merger and acquisition to

make the distinction between what is a merger and an acquisition.

An acquisition it is when one company takes over another and clearly established
itself as the new owner. For example Google's largest acquisition as of March
2008 is the purchase of DoubleClik which is an advertising company.

A merger it is when two companies which most of the time have the same size,
agree to go forward as a single new company rather than remain separately
owned and operated. For example the merger between Clear Channel and
Thomas H. Lee Partners.

In this pre-seminar paper we will analyse five mergers and acquisitions. Google -
DoubleClick, BP - Amoco, Rentokil - BET, Air-France - Alitalia, GDF-Suez