Mergers & Mergers & AcquisitionsAcquisitions

OverviewOverview

Mergers & AcquisitionMergers & Acquisition Differences Differences Types of MergersTypes of Mergers Types of AcquisitionsTypes of Acquisitions The Reasons Behind Mergers & AcquisitionsThe Reasons Behind Mergers & Acquisitions Example of MergerExample of Merger Example of AcquisitionExample of Acquisition

Merger and AcquisitionMerger and Acquisition

A A MergerMerger is a tool used by companies for the purpose of is a tool used by companies for the purpose of expanding their operations often aiming at an increase of expanding their operations often aiming at an increase of their long term profitability. their long term profitability.

An An AcquisitionAcquisition, also known as a takeover, is the buying of , also known as a takeover, is the buying of

one company (the ‘target’) by another.one company (the ‘target’) by another.

DifferencesDifferences

Mergers Acquisitions

Two firms are combined on a relatively co-equal basis

One firm buys another firm

Parent stocks are usually retired and Parent stocks are usually retired and new stock issuednew stock issued

Name may be the original or a Name may be the original or a combinationcombination

Board of directors of merging Board of directors of merging companies friendly agree on mergercompanies friendly agree on merger

Existing shares continue to float in Existing shares continue to float in market but new shares of those market but new shares of those companies are not issuedcompanies are not issued..

Can be by means of controlling Can be by means of controlling share, a majority, or all of the target share, a majority, or all of the target firm’s stockfirm’s stock

Can be friendly or hostileCan be friendly or hostile

Types of MergersTypes of Mergers

Horizontal – Between business competitorsHorizontal – Between business competitors

Vertical – Moving up or down the value chainVertical – Moving up or down the value chain

Conglomerate – Unrelated sectorsConglomerate – Unrelated sectors

Types of AcquisitionsTypes of Acquisitions

Asset PurchaseAsset Purchase

Stock PurchaseStock Purchase

Acquisition ProcedureAcquisition Procedure

In an acquisition one firm acquires the other, in either a In an acquisition one firm acquires the other, in either a friendlyfriendly

or hostile takeoveror hostile takeover

Friendly ProcedureFriendly Procedure Unfriendly ProcedureUnfriendly Procedure

The Reasons Behind The Reasons Behind Mergers & AcquisitionsMergers & Acquisitions

SynergiesSynergies GrowthGrowth Diversification to Reduce RiskDiversification to Reduce Risk Economies of ScaleEconomies of Scale TaxationTaxation Increased Market ShareIncreased Market Share

Example of Merger

NIB Bank Ltd. NIB Bank Ltd. merged with PICIC and PICIC Commercial Bank on 31 December 2007 Horizontal type NIB Bank Ltd is a subsidiary of Temasek Holdings of SingaporeNow NIB Bank is the 7th largest bank of Pakistan with 240 branchesMerger with PICIC was in order to expand the business and enhance in innovative products

Example of AcquisitionExample of Acquisition

Standard CharteredStandard Chartered After the acquisition of Union Bank in September 2006, After the acquisition of Union Bank in September 2006,

the new entity Standard Chartered Bank (Pakistan) the new entity Standard Chartered Bank (Pakistan) Limited was incorporated in Pakistan on 30 December Limited was incorporated in Pakistan on 30 December 2006 as a subsidiary of Standard Chartered PLC.2006 as a subsidiary of Standard Chartered PLC.

5th largest bank in Pakistan in terms of profitability and 5th largest bank in Pakistan in terms of profitability and assets.assets.