MERGER

(Advanced Financial Management)

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 Our team

Galuh dewandaru YOSSY EKA

PRADITA
190810201154 190810201146
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 01
Rationale for
Mergers
 Rationale for Mergers
Merger is the combination of two or more firms to form a
single firm. The primary motives behind corporate mergers are presented
is:

1. Synergy
The primary motivation for most mergers is to increase the value of the combined
enterprise.
2. Tax Considerations
Tax considerations have stimulated a number of mergers.
3. Purchase of Assets below Their Replacement Cost
Sometimes a firm will be touted as an acquisition candidate because the cost of
replacing its assets is considerably higher than its market value.
4. Diversification
Managers often cite diversification as a reason for mergers.
5. Manager’s Personal Incentives
Financial economists like to think that business decisions are based only
on economic considerations, especially maximization of firms’ values.
6. Breakup Value
Firms can be valued by book value, economic value, or replacement
value.
 02
TypeS of Merger

Economists classify mergers into four types

 TypeS of
Merger
Horizontal Vertical
merger merger

Congeneric Conglomerate
merger merger
03. Merger Analysis
Merger Analysis
Valuing the target firm
Market multiple analysis
Setting the bid price
Post-merger control
 04
The Role of INVESTMENT
Bankers
 The Role of INVESTMENT
Bankers
Investment bankers are involved with mergers in a number of ways: (1) They help arrange
mergers, (2) they help target companies develop and implement defensive tactics, (3) they help
value target companies, (4) they help finance mergers, and (5) they invest in the stocks of
potential merger candidates. These merger related activities have been quite profitable :

● Arranging mergers
● Developing defensive tactics
● Establishing a fair value
● Financing mergers
● Arbitrage operations
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