...Mergers and Acquisitions Basics Mergers and Acquisitions Basics All You Need To Know Donald DePamphilis Amsterdam • Boston • Heidelberg • London New York • Oxford • Paris • San Diego San Francisco • Singapore • Sydney • Tokyo Academic Press is an imprint of Elsevier Academic Press is an imprint of Elsevier 30 Corporate Drive, Suite 400, Burlington, MA 01803, USA Elsevier, The Boulevard, Langford Lane, Kidlington, Oxford, OX5 1GB, UK Copyright © 2011 Elsevier Inc. All rights reserved No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage and retrieval system, without permission in writing from the publisher. Details on how to seek permission, further information about the Publisher’s permissions policies and our arrangements with organizations such as the Copyright Clearance Center and the Copyright Licensing Agency, can be found at our website: www.elsevier.com/permissions. This book and the individual contributions contained in it are protected under copyright by the Publisher (other than as may be noted herein). Notices Knowledge and best practice in this field are constantly changing. As new research and experience broaden our understanding, changes in research methods, professional practices, or medical treatment may become necessary. Practitioners and researchers must always rely on their own experience and knowledge...
Words: 105288 - Pages: 422
...competitive nature of businesses is a direct reflection of a strong management team. In order for a company to remain competitive the management team must remain innovative, knowledgeable of the market, and open to new ideas. Expanding operations may be one way that the management team decides to stay ahead of the competition. Expansion may not only create growth, but it may create value, wealth, and fresh ideas for the future. This project is designed to analyze a possible operation expansion for Riordan Manufacturing, an industry leader in the field of plastic injection molding (Riordan Manufacturing, 2006). The researchers of this project will analyze three possible expansion approaches including an initial public offering (IPO), a merger, and an acquisition. It will then be determined which approach would lead the Riordan Manufacturing team ahead of the competition and ultimate greater success for the company. Strengths of Each Approach Riordan Manufacturing has three options to expand its operations, go public through an IPO, acquire another company in the same industry, or merge with another organization. The benefits or strengths of doing each of these are addressed below. If the choice is to go public through an IPO then the benefits to Riordan, according to Inc. (n.d.) are: • “A publicly traded company may tap a broader universe of investors as well as a larger pool of investment capital. • A publicly traded company may receive more public attention. •...
Words: 2211 - Pages: 9
...The Importance of the Organizational Behavior in a Merger and Acquisition Process: Study case of an International Company in Brazil Ana Cristina Limongi-França - Universidade de São Paulo Heidy Rodriguez Ramos - Universidade de São Paulo Daniella Silva da Conceição - Universidade de São Paulo ABSTRACT The 90’s decade is known by the large number of the merger and acquisitions. It happens mainly by the rising of the improvement of competition among companies. The merger and acquisition process of the Coca-Cola FEMSA were studied in this paper. The accomplishment of this field study was done from an exploratory research among the last-year business students, deep interviews and documental analysis. The result analysis was done according a methodology of cultural analysis, built on the following criteria: Market, Management and Competencies. Hence, research data confirm the importance of the organizational culture on a merger and acquisitions process. 1 1 INTRODUCTION Mergers and acquisitions are part of the capitalism history. The ninety decade was marked by the rising of this process, as a consequence of a higher competition level. In Brazil this period was marked by the economy deregulation made during the governments of the ninety decade and also by the opening of its market to imported goods. The companies who entered Brazilian market realized they could grow up fast because the competition among companies was short and the goods were obsolete. To survive at...
Words: 4672 - Pages: 19
...Chapter 1. Introduction to Mergers and Acquisition 1.1 Mergers and acquisition To opt for a merger or not is a complex affair, especially in terms of the technicalities involved. We have discussed almost all factors that the management may have to look into before going for merger. Considerable amount of brainstorming would be required by the managements to reach a conclusion. e.g. a due diligence report would clearly identify the status of the company in respect of the financial position along with the networth and pending legal matters and details about various contingent liabilities. Decision has to be taken after having discussed the pros & cons of the proposed merger & the impact of the same on the business, administrative costs benefits, addition to shareholders' value, tax implications including stamp duty and last but not the least also on the employees of the Transferor or Transferee Company. Merger: Merger is defined as combination of two or more companies into a single company where one survives and the others lose their corporate existence. The survivor acquires all the assets as well as liabilities of the merged company or companies. Generally, the surviving company is the buyer, which retains its identity, and the extinguished company is the seller. Merger is also defined as amalgamation. Merger is the fusion of two or more existing companies. All assets, liabilities and the stock of one company stand transferred to transferee company in consideration...
Words: 1872 - Pages: 8
...Mergers and Acquisitions CHAPTER 21 OPENING CASE I n April 2007, Netherlands-based ABN AMRO and U.K.-based Barclays announced a merger that would create the world’s largest asset manager as well as one of the world’s five largest banks. The value of the deal was about €67 billion ($91.07 billion). Under the terms of the merger, Barclays would offer 3.225 shares of the new company for each share held by ABN AMRO shareholders. Also, ABN AMRO agreed to sell LaSalle Bank to Bank of America for $21 billion, which would result in a €12 billion distribution to shareholders. How do companies like ABN AMRO and Barclays determine whether a merger is a good idea? This chapter explores reasons that mergers should take place, and, just as important, reasons why they should not. There is no more dramatic or controversial activity in corporate finance than the acquisition of one firm by another or the merger of two firms. It is the stuff of headlines in the financial press, and it is occasionally an embarrassing source of scandal. The acquisition of one firm by another is, of course, an investment made under uncertainty, and the basic principles of valuation apply. One firm should acquire another only if doing so generates a positive net present value for the shareholders of the acquiring firm. However, because the NPV of an acquisition candidate can be difficult to determine, mergers and acquisitions, or M&A activities, are interesting topics in their own right. Some of the special...
Words: 14756 - Pages: 60
...Chapter Six Business Formation: Choosing the Form that Fits Review Questions 1. Describe the basic features that distinguish the four basic forms of business ownership: sole proprietorships, general partnerships, C corporations, and limited liability companies. Sole proprietorship-a form of business ownership with a single owner who usually actively manages the company. General partnership-a partnership in which all partners can take an active role in managing the business and have unlimited liability for any claims against the firm. Limited liablility companies- form of partnership in which all partners have the right to participate in management and have limited liability for company debt Corporations- a form of business ownership in which the business is considered a legal entity that is separate and distinct from owners. 2. Why do many entrepreneurs initially set up their businesses as sole proprietorships? Why do many successful entrepreneurs eventually decide to convert their sole proprietorship to some other form of ownership such as a corporation or LLC? It’s the easiest and least expensive form of business to set up. And allows the single owner to recap all of the profits. Sole proprietorship have major limitations can only have one owner. Risk associated with unlimited liability and its difficult to manage a business on your own. 3. How do limited partnerships and limited liability partnerships...
Words: 644 - Pages: 3
...Questions 1. Describe the basic features that distinguish the four basic forms of business ownership: sole proprietorships, general partnerships, C corporations, and limited liability companies. Sole Proprietorships: One Owner. Personal income will become taxed in business General Partnership: Two or more people can share profits and liabilities; it is the same as sole proprietorship C Corporations: Pays Federal and state income taxes on earnings Limited Liability Company: Hybrid between partnership and a corporation, combining limited liability advantage of a corporation with tax status. 2. Why do many entrepreneurs initially set up their businesses as sole proprietorships? Why do many successful entrepreneurs eventually decide to convert their sole proprietorship to some other form of ownership such as a corporation or LLC? 3. How do limited partnerships and limited liability partnerships differ from general partnerships and from each other? 4. What advantages help explain why virtually all large companies are organized as C corporations? 5. What steps are involved in forming a C corporation? 6. Describe the relationship between a corporation’s common stockholders, its board of directors, and its chief executive officer (CEO). 7. How does a merger differ from an acquisition? What is the difference between a horizontal merger or acquisition and a vertical merger or acquisition? Give a real world example...
Words: 288 - Pages: 2
...|Merger and Acquisition | INDEX |S.NO |Contents |Page No. | |1 |Abstract |3 | |2 |Introduction |4 | |3 |Types of Mergers |4 | |4 |Reasons for Mergers and Acquisition |5 | |5 |Advantages of Mergers and Acquisition |7 | |6 |Failure of Mergers and Acquisition |10 | |7 | Making it Happen |13 | |8 |Conclusion |14 | |9 |Bibliography |15 | Abstract: As a corporate strategy, Mergers and Acquisition have been used to expand size and growth of business. In this report this corporate strategy is investigated...
Words: 3833 - Pages: 16
...Emphasis on engineering, design, quality. High costs (not share platforms, exchange rates, inefficient production methods and high labor costs. | Diversification | Least diversified and less vertically integrated. | “Integrated technology group”. Five divisions: passenger cars, commercial vehicles, aerospace, services, directly managed businesses. | Global sales | Dependence on North America market- outside sales only 8% of total. | Huge global sales network, but 63% sales come from European dealers | Merger of such companies was urgent due to the trends of consolidation and globalization in automobile industry (refer to exhibit 1) and difficulties faced by the companies to address them. Despite a roughly similar size, both companies were significantly different from each other in crucial moments, which made the success of the merger doubtful. However, each company had strong capabilities that could complement each other in order to achieve the major benefit of the merger, which is the growth – for...
Words: 621 - Pages: 3
...MERGERS & ACQUISITIONS WITH RESPECT TO ORGANIZATIONAL CULTURE INTRODUCTION 1. Mergers and acquisitions have often come in waves of activity that were motivated by different factors. Further 1890 to 1905, more than 200 mergers of major importance occurred as many small companies in the same industries merged to form monopolistic entities. After 1905, merger activity was particularly heavy during the 1920s as small companies in similar industries continued to merge to gain market power. According sources, the capacity of merger activity was also heavy after World War II as large companies completed friendly acquisitions of small privately held companies. Another large wave of mergers occurred in the 1960s and 1970s, motivated largely by the quest for risk reduction through diversification. 2. Investopedia explains “Mergers and Acquisitions – M & A” as general term used to refer to the consolidation of companies. A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed (investopedia.com, 2013). 3. M & A and corporate restructuring are a vital part of the corporate financial world. According to Ben McClure everyday Wall Street investment bankers arrange M & A transactions, which bring separate companies together to transform into large ones. 4. Furthermore describing on Mergers and Acquisitions, two terms separately. Mergers: two similar-sized firms are combined –...
Words: 2078 - Pages: 9
...Human Resources Management – Assignment The Role of Human Resources in Mergers & Acquisitions “In implementing an M&A, most managers and business leaders focus on the financials. But success often hinges on how you deal with people issues and cultural Integration”. Andrew F. Giffin and Jeffrey A. Schmidt 1 Successful Mergers and Acquisitions are much more than just a name change on the premises and changing company branded material and policies. Mergers and acquisitions (M&A’s) are notoriously risky, and international M&A’s are even more so. Numerous studies on M&A’s, show that success is not always guaranteed. To the contrary, the biggest percentage of (costly) M&A’s, do not achieve goals and set objectives. Mercer Human Resource Consulting, after examining the evidence, has concluded that as many as 60–70% of M&A’s fail to deliver their intended benefits. Another study by CFERF 2 claims that 75% of the deals have failed or underperformed. Although it is clear that some of these unsuccessful ventures are due to financial and market factors, the root cause of a considerable number of failures lies in disregarded HR issues and activities. Some of the main (HR- people) mistakes in mergers and acquisitions are: o HR not being involved early in the game o Lack of culture blending and misaligned values- do not underestimate cultural differences o No clarity on mission and vision o Communications, communications, communications – lack of it in the main Other research has shown that...
Words: 1723 - Pages: 7
...Time Warner Merger One of the largest and most controversial proposed mergers in recent history is the acquisition of Time Warner Cable by Comcast. This proposed acquisition was structured through a friendly agreement between Time Warner Cable and Comcast. Comcast, the initiator of this merger, is set to acquire Time Warner Cable’s eleven million managed service subscribers, Time Warner’s other equity holdings in areas such as Sterling Enterprises and DukeNet Communications, along with it’s local programming and news stations. The proposed method of financing for this acquisition is a stock-for-stock transaction. Through this Comcast will acquire all of Time Warner’s 284.9 million outstanding shares for an equity stake in Comcast amounting to 45.2 billion dollars at the current market value (Comcast 1). In order to address competitive market failure concerns associated with the proposed acquisition, Comcast structured a mutual agreement with competing firm Charter Communications under which Comcast will divest 1.4 million existing Time Warner Cable customers to Charter for cash, along with a trade of 1.6 million customers between Charter and Comcast in order to promote and greater enhance the geographic market presence of both firms (Kang 2). Through this additional action Comcast and Charter seek to improve operational efficiencies, grow customer satisfaction, and better deploy technology in their respective markets (Comcast 1). As stated earlier this merger is extremely...
Words: 2270 - Pages: 10
...2003, an increase of 22%. Also in Europe has increased from 4268 to 200-5114 years in 2003, an increase of 19% and the rest of the world accounted for only 6% of the increase. The industry has experienced significant change and consolidation, mergers and acquisitions are becoming increasingly popular in the strategy of the pharmaceutical industry. In 1990, Top 10 Global Business accounted for 28% of this market sector as a whole, but changed with changes in business strategy in this area to 45% in 2000 and should continue to grow in the coming years. It is a fact that the industry is growing faster if diversification and mergers and acquisitions business strategy is the central or pivotal, as it provided the basic skills available to fight against the challenges and obstacles. The main challenges the industry is the rising cost of R & D, obtaining approvals for new products and the time of testing and implementation, intense competition from generics and follow etc. Especially the reasons force pharmaceutical companies to stay on the basics and focus on the allocation of non-core activities. Second context: - "All marriages are happy. Later, he creates life problems." (Anonymous) Why mergers and acquisitions take place? The reason to grow and improve productivity, increase market penetration performance, improve the share price, share costs, etc. These are...
Words: 500 - Pages: 2
...Executive Summary The reason behind mergers and acquisitions is to create more value as two organisations put together would be more valuable than two separate organisations whereas the basic theory behind buying an organisation is to build shareholder value over and above of the sum of the two organisations. Mergers and acquisitions have become a regular occurrence of growth for organisations in the recent years. Organisations are presented with likely wider market share as well as open to a more diversified market. Mergers has most times been seen to be profitable both competition and consumers by allowing companies to run more successfully. It may occasionally lead to decrease competition in some ways and highly complicated as can be seen in today's world. There are laws governing mergers and acquisitions in the UK which is covered in the city Code on Takeovers and Mergers which is created to ensure that shareholders are cared for and not denied the privilege to decide on the value of a takeover and that shareholders of the same standard are afforded equal rights by an offeror. CSR is the process of evaluating a company's impact on the society and assessing their responsibilities. It defines areas of concern and initiatives to better relations with the people as well as the environments affected by business functions. Shell Plc certainly needs to do more to improve the quality of life in the society in which they operate as well as the environment where they...
Words: 2335 - Pages: 10
...Anatomy of a merger: behavior of organizational factors and processes throughout the pre- duringpost-stages (part 1) Steven H. Appelbaum Concordia University, Montreal, Quebec, Canada Joy Gandell Concordia University, Montreal, Quebec, Canada Harry Yortis Hydro-Quebec, Montreal, Quebec, Canada Shay Proper Montreal Stock Exchange, Montreal, Quebec, Canada Francois Jobin Kruger, Inc., Trois-Rivie Âres, Quebec, Canada Keywords Mergers and acquisitions, Organizational behaviour, Process efficiency, Managers Introduction Since the late 1980s, the total number of mergers and acquisitions (M&As) has far surpassed the number that occurred throughout the 1960s. Whereas the M&As throughout the 1960s were mainly due to unions between conglomerates, the 1980s and 1990s has witnessed an increase in M&As between firms of different sizes and different industry types (Tetenbaum, 1999). The trend to engage in this type of vertical integration or diversification does not seem to show signs of diminishing in the near future. Yet, at best, the firm that initiates the merger usually only achieves normal economic profits while the value created rests almost solely with the firm that was approached (Barney, 1997). The primary purpose of merging and acquiring new firms is usually to improve overall performance (Lubatkin, 1983) by achieving synergy, or the more commonly described as the ``2 + 2 = 5'' effect (Cartwright and Cooper, 1993a; Hovers, 1971) between two business units that will increase...
Words: 10332 - Pages: 42
