ANKUSH VASANT PALKAR

HPGD / OC14 / 1044

 INTRODUCTION
Mergers and acquisitions are transactions in
which the ownership of companies, other
business organizations or their operating
units are transferred or combined. As an
aspect of strategic management, M&A can
allow enterprises to grow, shrink, change the
nature of their business or improve their
competitive position
 Acquisitions
•
An acquisition or takeover is the purchase

of one business or company by another

company or other business entity. Such

purchase may be of 100%, or nearly 100%,

of the assets or ownership equity of the

acquired entity.
 Acquisitions Main Benefits
(Main Reason)
•
To acquire complementary product,
in order to broaden the line.
•
To acquire new markets or
distribution channels
•
To acquire additional mass and benefits
from economics of scale
•
To acquire technology to complement
or replace the currently used one
 Reasons for Acquisitions

Increase market power

Overcome entry barriers

Cost of new product development

Increased seed to market

Lover risk vs. new product

Increased diversification

Avoid excessive competition
 DIFFERNCE BETWEEN MERGER AND
ACQUISITION
MERGER merger.
1 Merging of two
organization in to one
2 It is mutual decision
3 Merger expensive
than acquisition (higher
legal cost )
4 Through merger
shareholder can
increase their net worth
5 It is time consuming
and the company has to
maintain so much legal
issue
6 Dilution of
ownership occurs in
 ACQUISITION
1 Buying one
organization by
another
2 It can be
friendly
takeover or
hostile
takeover
3 Acquisition is
less expensive
than merger
4 Buyers cannot raise
their enough capital
5 It is faster and
easier transaction
6 The acquirer does
not experience the
dilution of ownership
TYPES OF MERGRS
Vertical mergers
•
Vertical mergers occur between firms in different stages of

production operation. In oil industry, for example, distinctions are

made between exploration, and production, refining and marketing to

ultimate customer.

Conglomerate mergers
Conglomerate mergers involve firms engaged in unrelated business
activates. Among conglomerate mergers, three types have been
distinguished:
•
Product-extension merger broaden the product lines of the firms.
•
A geographic market extension merger involves two firms
•
Finally, the other conglomerate mergers, which are often referred to
as pure conglomerate mergers involve, unrelated business activities
 Lending buyouts (LBOs):

It is the buyout of all shares or the assets of a company which is

already
introduced to the Stock Exchange by a group of investors through a
transaction
that is mainly financed via lending. Investors usually are financially
supported by
enterprise specializing in buyouts or by Investment Banks that
arrange such
transactions.
 CAUSES OF FAILURE OF MERGERS AND ACQUISITIONS

Overpayment:

This is very common cause of failure of acquisition & mergers. De

Pamphilis D.??. (2005) found that overpayment often has destroys
consequences. Overpayment leads to expectation of higher profitability
which is not possible.

Integration issues:

Strau (2007) studied that business cultures, work ethics, etc. needs
to be flexible and adaptable. Inefficiencies or administrative problems are a
very common
occurrence in a merger which often nullifies the advantages of the mergers.
Faulty Strategic Planning and unskilled execution

Schuler, R.S. Jackson, S.E. Luo, ??..

(2004): Faulty Strategic Planning and unskilled execution often leads to
problems over expectation of strategic benefits is another area of concern
surrounding mergers.

Power Politics:

Randall S. Schuler, Susan E. Jackso??? (2001) observed that there is a

tendency to assume that power disputes are more common in the case
of acquisitions than
mergers, there is no such thing as “a merger of equals”.
 Business valuation
The five most common ways to value a
business are:
* asset valuation
* historical earnings valuation,
* future maintainable earnings
valuation,
* relative valuation (comparable
company and comparable
transactions
* discounted cash flow (DCF) valuation
Mergers are generally differentiated from acquisitions
partly by the way in which they are financed and partly
by the relative size of the companies. Various methods
of financing an M&A deal exist:

Cash
Payment by cash. Such transactions are usually termed acquisitions
rather than mergers because the shareholders of the target
company are removed from the picture and the target comes under
the (indirect) control of the bidder's shareholders.

Stock
Payment in the form of the acquiring company's stock, issued to the
shareholders of the acquired company at a given ratio proportional
to the valuation of the latter. They receive stock in the company
that is purchasing the smaller subsidiary.
 Conclusion
As per my final and ultimate conclusion, yes, merger
of all these companies have created value to the
shareholders of the target company and acquired
company.
 BIBLIOGRAPHY
•
www.wikipedia.com
•
www.google.com
•
www.ourfinanacebook.com
Thank
you........
!