Premium Essay

What Is a Merger and Acquisition Strategy?

In: Business and Management

Submitted By theking10
Words 334
Pages 2
What is a merger and acquisition strategy?

Mergers and acquisitions (M&A) are both aspects of strategic management, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary.
M&A can be defined as a type of restructuring in that they result in some entity reorganization with the aim to provide growth or positive value. Consolidation of an industry or sector occurs when widespread M&A activity concentrates the resources of many small companies into a few larger ones.

The distinction between a "merger" and an "acquisition" has become increasingly blurred in various respects (particularly in terms of the ultimate economic outcome), although it has not completely disappeared in all situations. From a legal point of view, a merger is a legal consolidation of two companies into one entity, whereas an acquisition occurs when one company takes over another and completely establishes itself as the new owner (in which case the target company still exists as an independent legal entity controlled by the acquirer). Either structure can result in the economic and financial consolidation of the two entities. In practice, a deal that is an acquisition for legal purposes may be euphemistically called a "merger of equals" if both CEOs agree that joining together is in the best interest of both of their companies, while when the deal is unfriendly (that is, when the target company does not want to be purchased) it is almost always regarded as an "acquisition".

Reasons for acquisitions:
• Increase market power

• Overcoming entry barriers to new market or regions

• Avoid the cost of developing new products and increase the speed of new market entries…...

Similar Documents

Premium Essay

Mergers and Acquisitions

...Mergers and Acquisitions Key Elements to Success In a competitive market, businesses are constantly undergoing changes to remain profitable, flexible, and efficient. As a result of adapting to gain and/or maintain a dominant market position, businesses often look into mergers and acquisitions. Mergers and acquisitions are a corporate strategy where two or more businesses become one business that’s incredibly larger. Mergers and acquisitions involve buying, selling, combining, or dividing businesses in the same location or a new central location. They are becoming very popular because they are a way to strengthen and maintain a business’s position in their respective market place. They can be a fast and effective way to help a company grow and gain a competitive advantage. However, there is a difference between a merger and an acquisition and sometimes the difference becomes distorted because some people do not know the distinction between the two. A merger is when a company or business merges with another business and become one single new company. For the most part, the firms are usually close in size and the companies’ stocks become one new company stock as well. Mergers are usually well thought out plans and many hours of evaluation from the managers and owners of the respective companies that are involved. Looking deeper though, a merger could be called a takeover because sometimes that’s exactly what it is but to avoid negative connotations, they are......

Words: 1836 - Pages: 8

Free Essay

Mergers and Acquisitions

...When we talk about acquisitions or takeovers, we are talking about a number of different transactions. These transactions can range from one firm merging with another firm to create a new firm to managers of a firm acquiring the firm from its stockholders and creating a private firm. We begin this section by looking at the different forms taken by takeovers. 1. TAKEOVER A corporate action where an acquiring company makes a bid for an acquire. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares. There are three types of takeovers: 1.1 Friendly takeovers A "friendly takeover" is an acquisition which is approved by the management. Before a bidder makes an offer for another company, it usually first informs the company's board of directors. In an ideal world, if the board feels that accepting the offer serves the shareholders better than rejecting it, it recommends the offer be accepted by the shareholders. 1.2 Hostile takeovers A "hostile takeover" allows a suitor to take over a target company whose management is unwilling to agree to a merger or takeover. A takeover is considered "hostile" if the target company's board rejects the offer, but the bidder continues to pursue it, or the bidder makes the offer directly after having announced its firm intention to make an offer. A hostile takeover can be conducted in several ways.    A tender offer can be made where the acquiring company makes a public offer at a...

Words: 2649 - Pages: 11

Premium Essay

Mergers and Acquisitions

...wealth. Therefore, merger and acquisition decisions should be consistent with shareholder wealth maximization, and financial characteristics of the targets to consider in the decision-making process. Financial managers and decision makers are working for the shareholders and their primary goal should be to make profits in order to maximize the wealth of the company and the shareholders. This paper will discuss Google's potential acquisition of Groupon, an on-line coupon company, and if this merger will add value to the shareholders of both corporations. Finally, this paper will make a recommendation to Google about the possible acquisition of Groupon. At times a company may decide that owning a particular resource is essential because otherwise, its rivals could gain control of it. That rival might then limit the firm's ability to access the resource in the future, or otherwise use it against the company. A company might believe that controlling this particular resource is essential for possibly getting a leg up on the competition or a way for a company to start into a new industry without the capital and trial and error methods of starting their own project. Valuable resources that a company may want to control include patents, intellectual property, or even other companies. Let's look at two examples of the strategic importance of controlling resources. “One plus one makes three: this equation is the special alchemy of a merger or an acquisition. The key......

Words: 1496 - Pages: 6

Premium Essay

Mergers and Acquisitions

...Assignment 2: Mergers and Acquisitions Ryan Butler Dr. Laura Poluka BUS508 30 July 2014 Augusta Campus, Strayer University Mergers and Acquisitions Examine the circumstances that resulted in the merger or acquisition for the selected company. Speculate on two (2) reasons why the resulting decision to merge or to acquire / be acquired was made. The two airlines American Airlines and US Airways merged on December 9th, 2013 to form the American Airline Group that became the biggest airline in the world. This merger was formed by the increased competition that airlines are facing in the business today. The merger presented an opportunity for both airlines to exploit the benefits of an extended network that would result after merging as opposed to when each operates independently. One of the main circumstances that surrounded the merger was the impending bankruptcy of American Airlines. The company had filed for bankruptcy in 2011 although it reverted to profitability in July the same year. The merger would increase access to business opportunities for both airlines, especially American Airlines that would reduce its exposure to financial risks, which was the initial cause for the company filing for bankruptcy. The merger would create increased synergies that would be evident through increased financial strength and flexibility in the market (DePamphilis, 2008). Each of the merged entities would have access to more destinations and larger clientele. Each of them......

Words: 1382 - Pages: 6

Premium Essay

Merger & Acquisition

... Mergers, Acquisitions and Corporate Restructuring II MERGERS, ACQUISITIONS AND CORPORATE RESTRUCTURING Mergers, Acquisitions and Corporate Restructuring Edited by Chandrashekar Krishnamurti Vishwanath S.R. Copyright © Chandrashekar Krishnamurti and Vishwanath S.R., 2008 All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage or retrieval system, without permission in writing from the publisher. First published in 2008 by Response Books Business Books from SAGE B1/I-1 Mohan Cooperative Industrial Area Mathura Road, New Delhi 110 044, India SAGE Publications Inc 2455 Teller Road Thousand Oaks, California 91320, USA SAGE Publications Ltd 1 Oliver’s Yard, 55 City Road London EC1Y 1SP, United Kingdom SAGE Publications Asia-Pacific Pte Ltd 33 Pekin Street #02-01 Far East Square Singapore 048763 Published by Vivek Mehra for Response Books, typeset in 9.5/13 pt Berthold Baskerville by Star Compugraphics Private Limited, Delhi and printed at Chaman Enterprises, New Delhi. Library of Congress Cataloging-in-Publication Data Mergers, acquisitions and corporate restructuring/edited by Chandrashekar Krishnamurti, Vishwanath S.R. p. cm. Includes references and index. 1. Consolidation and merger of corporations. Corporate reorganizations. I. Vishwanath, S.R., 1971– II. Krishnamurti, Chandrashekar, 1956– HG4028.M4 .M44 658.1/6 22......

Words: 62616 - Pages: 251

Premium Essay

Mergers & Acquisitions

...Chapter 1 Course 7: Mergers & Acquisitions (Part 1) Prepared by: Matt H. Evans, CPA, CMA, CFM Basic Concepts Mergers and acquisitions represent the ultimate in change for a business. No other event is more difficult, challenging, or chaotic as a merger and acquisition. It is imperative that everyone involved in the process has a clear understanding of how the process works. Hopefully this short course will provide you with a better appreciation of what is involved. You might be asking yourself, why do I need to learn the merger and acquisition (M & A) process? Well for starters, mergers and acquisitions are now a normal way of life within the business world. In today's global, competitive environment, mergers are sometimes the only means for long-term survival. In other cases, such as Cisco Systems, mergers are a strategic component for generating long-term growth. Additionally, many entrepreneurs no longer build companies for the long-term; they build companies for the short-term, hoping to sell the company for huge profits. In her book The Art of Merger and Acquisition Integration, Alexandra Reed Lajoux puts it best: Virtually every major company in the United States today has experienced a major acquisition at some point in history. And at any given time, thousands of these companies are adjusting to post-merger reality. For example, so far in the decade of the 1990's (through June 1997), 96,020 companies have come under new ownership worldwide in deals worth a...

Words: 7842 - Pages: 32

Premium Essay

Merger & Acquisition

...Excellence in Financial Management Course 7: Mergers & Acquisitions (Part 1) Prepared by: Matt H. Evans, CPA, CMA, CFM This course (part 1) provides a concise overview of the merger and acquisition process, including the legal process, federal regulations and due diligence. The purpose of the course is to give the user a solid understanding of how mergers and acquisitions work. This course is recommended for 2 hours of Continuing Professional Education. In order to receive credit, you will need to pass a multiple choice exam which is administered over the internet at www.exinfm.com/training Published March 2000 Chapter 1 Basic Concepts Mergers and acquisitions represent the ultimate in change for a business. No other event is more difficult, challenging, or chaotic as a merger and acquisition. It is imperative that everyone involved in the process has a clear understanding of how the process works. Hopefully this short course will provide you with a better appreciation of what is involved. You might be asking yourself, why do I need to learn the merger and acquisition (M & A) process? Well for starters, mergers and acquisitions are now a normal way of life within the business world. In today's global, competitive environment, mergers are sometimes the only means for long-term survival. In other cases, such as Cisco Systems, mergers are a strategic component for generating long-term growth. Additionally, many entrepreneurs...

Words: 8892 - Pages: 36

Premium Essay

Mergers and Acquisitions

...Mergers and Acquisitions Tasha Powers Dr. Michael Laverty Business 508 – Contemporary Business November 17, 2014 A merger or acquisition is a combination of two companies where one corporation is completely absorbed by another corporation. The less essential company loses its identity and becomes part of the more imperative corporation, which retains its identity. A merger extinguishes the merged corporation, and the surviving corporation assumes all the rights, privileges, and liabilities of the merged corporation (Gomes, 2011). A merger is not the same as a consolidation, in which two corporations lose their separate identities and unite to form a completely new corporation. Federal and state laws regulate mergers and acquisitions. Regulation is based on the concern that mergers inevitably eliminate competition between the merging firms (Helms, 1996). This concern is most delicate where the participants are direct rivals, because courts often presume that such arrangements are more prone to restrict output and to increase prices. The fear that mergers and acquisitions reduce competition has meant that the government carefully scrutinizes proposed mergers. On the other hand, since the 1980s, the federal government has become less aggressive in seeking the prevention of mergers (Gomes, 2011). Mergers appear in three forms, based on the competitive relationships between the merging parties. In a......

Words: 1084 - Pages: 5

Premium Essay

Merger and Acquisition

...Code: IB-522 Term Paper on ―Merger of Equals of LafargeHolcim Cement Limited‖ Prepared by Asmina Akter; ID-35 Mohoan Chowdhury; ID-46 S. M. Yusuf Mallick; ID-71 Md. Harun-Ur-Rashid; ID-73 Supervisor Suborna Barua Assistant Professor Department of International Business University of Dhaka Date of Submission: 01.07.15 1|Page Letter of Transmittal 1st July, 2015 The Course Instructor Suborna Barua Department of International Business University of Dhaka Subject: An application for acceptance a term paper on “Merger of Equal of LafargeHolcim Cement Limited” Dear Sir, It is a great pleasure to submit you a term paper on ―Merger of Equal of LafargeHolcim Cement LTD‖. This paper is prepared to learn the motives, process, integration and result of merger of Lafarge and Holcim two giant cement company. We request you to excuse us for any mistake that may occur in the paper despite of our best effort. We believe that you will view all mistakes with your generous consideration. Yours sincerely Asmina Akter, ID-35 Mohoan Chowdhury; ID-46 S. M. Yusuf Mallick; ID-71 Md. Harun-Ur-Rashid; ID-73 Department of International Business (MBA 7th Batch) University of Dhaka 2|Page Executive Summary Corporate restructuring is becoming popular day by day and merger and acquisitions are being considered as the big steps towards corporate restructuring. Being a part of strategic issues, merger and acquisitions are subject to lots of issues......

Words: 9257 - Pages: 38

Premium Essay

Merger and Acquisitions

...The Rise of Emerging Markets in Mergers and Acquisitions Developing countries are gaining strength and influence T he rise in the number of mergers over the past five years has been dramatic. Unlike previous merger waves, however, companies in emerging markets are playing an increasingly important role. Indeed, while the number of majority acquisitions increased globally by 6 percent, acquisitions of established companies by emerging firms grew at an annual rate of 26 percent. Although their motives differ from traditional M&A activity, it is clear that, in the near term, emerging competitors present a potential threat to companies in developed countries. Mergers and acquisitions have become a staple of newspaper headlines. Although most M&A activity is initiated by companies in the developed world, a recent A.T. Kearney study of global M&A reveals that a paradigm shift is occurring: Beginning in 2002, deals between developing and developed countries grew at an annual rate of 19 percent— far in excess of the industry average and four times faster than deals conducted within either developing or developed countries alone (see figure 1 on page 2). While not large in absolute terms, this rate of growth indicates how rapidly the developing world is catching up in the M&A business. In fact, the study found that companies from developing countries such as China, India, Malaysia, Russia, the United Arab Emirates and South Africa are snapping up......

Words: 3962 - Pages: 16

Premium Essay

Mergers and Acquisitions

...Sandeep K Krishnan In an ideal merger, the newly created entity pools the best features of the two merging organizations. A well planned process built on the foundations of an open, honest and consistent communication strategy can pave the way. Mergers and acquisitions have become a common phenomenon in recent times. A merger of the size like HP-Compaq has implications for the workforce of these companies across the globe. Although the merging entities give a great deal of importance to financial matters and the outcomes, HR issues are the most neglected ones. Ironically studies show that most of the mergers fail to bring out the desired outcomes due to people related issues. The uncertainty brought out by poorly managed HR issues in mergers and acquisitions have been the major reason for these failures. The human resource issues in the mergers and acquisitions (M&A) can be classified in two phases the pre-merger phase and the post merger phase. Literature provides ample evidence of difference in between the human resource activities in the two stages: the pre-acquisition and post acquisition period. Due diligence is important in the first phase while integration issues take the front seat in the later. The pre acquisition period involves an assessment of the cultural and organizational differences, which will include the organizational cultures, role of leaders in the organization, life cycle of the organization, and the management styles. The mergers often prove to be......

Words: 3465 - Pages: 14

Premium Essay

Mergers & Acquisitions

...pharmaceutical firm, expands in Egypt through multiple acquisitions, while the parent firm itself is subject to M&A at a global level. The leading-brand ketchup manufacturer Heinz has established a production facility for the Middle East jointly with a Kuwaiti multinational specialising in being the local partner for foreign fast-food chains throughout the Arab countries. THE EGYPTIAN COMPANY FOR MOBILE SERVICES (MOBINIL) Introduction Mobile telephony is capturing an increasing share of global telecommunications services, accounting for 23 per cent of global telecommunications revenues (up from 3 per cent in 1990). Mobile telephony is one of the high growth market segments of the Egyptian telecommunications sector, having outpaced the growth of fixed-line telephony, which currently stands at 7.5 million lines, growing at a compound annual growth rate (CAGR) of approximately 14.6 per cent during the period 1995/2000, compared with the staggering CAGR of 169 per cent for mobile telephony during the period 1997/2002 (American Chamber of Commerce in Egypt 2001, p. 14). Since the opening up of the sector to private investment in 1998, the Egyptian mobile telecommunications sector has been host to two of the world’s largest mobile operators, namely France Telecom and Vodafone. The two companies, in partnership with their 88 Egyptian Case Studies 89 Egyptian counterparts, have been operating as a duopoly, in what is perceived to be a market of......

Words: 14890 - Pages: 60

Premium Essay

Mergers and Acquisitions

...Introduction Mergers and acquisition (M&A) varies from country to country. Some countries have laws regulating M&A while others don’t. M&A basically is a combination of two or more businesses into one new business. What defines the merger or acquisition is how the combination is brought about. Mergers are usually negotiated between parties before the combination occurs while acquisition does not necessarily have to go through negotiations between parties. Mergers and Acquisition can succeed or fail base on a number of factors. This paper will examine the concept of mergers and acquisition, why M&A fail and possible recommendations Input Businesses sometimes merge or acquire to improve on their competitiveness and to meet their strategic objectives. Mergers and acquisition can come about because of stiff competition in the market or to create economies of scale or to enter new markets, or to diversify or a combination of many factors as mentioned in this sentence. Sometimes the only reason an acquire may purchase a business is for speculative profits, in that the sole purpose is to purchase with the intention to split them into smaller pieces and selling them or parts thereof for a price which is much higher than the acquiring price. Mergers and acquisition can also come about because of management failures. This situation can come about because management was unable to move the company in a positive direction which would have maximize shareholders wealth. Some......

Words: 2142 - Pages: 9

Premium Essay

Mergers and Acquisitions

...Overview of Mergers and Acquisitions Mergers and acquisitions have been taking place since World War I, there is a lot of history to why they came about and the changes in regulation as the application of it has progressed. Many companies end because of a merger or acquisition while other companies become market powers because of a merger. Mergers and acquisitions occur for a variety of reasons and there are a number of ways that it can be carried out. Understanding what makes a company successful or unsuccessful can help one understand why a company merges with another company or acquires another company. One must also understand what contributes to making a merger or acquisition a success or a failure. There are many things that keep a company successful. The corporate culture is very important as well as the geographical place that it is in. The people who run it, both upper management and lower management, can also make or break a business. When one of these aspects goes wrong and the company is going down hill a merger or acquisition is a big possibility. In many instances it is the only thing that can save the life of a business. A merger is defined as two firms whom are usually the same size that agree to join as one company that is operated and owned as one (investopedia.com). It is a combination of two companies to create a new company. All of the assets and liabilities of the companies are shared by the one company that is formed. An......

Words: 1589 - Pages: 7

Premium Essay

Mergers & Acquisition

...business mergers and acquisitions Introduction 1. Should the government regulate mergers and acquisitions more carefully? 2. Purpose of the Study 3. Scope of Study 4. Method and Procedures Analysis 1. Positive opinions 2. Negative opinions 3. Government action Summary, Conclusion, and Recommendation 1. Summary 2. Conclusion 3. Recommendation Government regulation over business mergers and acquisitions Prepared for Anne Joiner English Professor Central Washington University Prepared by Diep Chu July 18, 2012 To: Senator Joseph Smith From: Diep Chu Date: July 18, 2012 Subject: Government regulation over business mergers and acquisitions I submit the accompanying report, authorized by Anne Joiner, English Professor at Central Washington University, Des Moines, on the research of mergers and acquisitions in market. Available literature and government Web sites were examined in order to answer the question: Should the government regulate mergers and acquisitions more carefully? The report employed secondary research using electronic sources of scholarly articles, government publications, and companies’ articles through the Internet due to the research time and funding limitation. All research was conducted in mid-July, 2012. This research project has been a fantastic experience for me when I get to know more details about the popular issue currently happen in our business market, mergers and......

Words: 2406 - Pages: 10