8/3/2019 U7- Merger and Acquisitions
1/20
Unit 7: M&As
1 + 1 = 3 ?
8/3/2019 U7- Merger and Acquisitions
2/20
Mergers and Acquisitions
8/3/2019 U7- Merger and Acquisitions
3/20
Reasons for M&As
Discussion
1. Why do people get married?
2. Why do companies merge with/
acquire each other?
8/3/2019 U7- Merger and Acquisitions
4/20
A takeover/ An Acquisition
When one company takes overanotherand
clearly establishes itself as thenew owner,
the purchase is called an acquisition. From alegal point of view, the target company
ceases to exist, the buyer "swallows" the
business and the buyer's stock continues to
be traded.
Source: http://en.wikipedia.org/wiki/Mergers_and_acquisitions#Distinction_between_mergers_and_acquisitions
8/3/2019 U7- Merger and Acquisitions
5/20
A takeover/ An Acquisition
A mergerhappens when two firms agree to
go forward as a single new company rather
than remain separately owned and operated.This kind of action is more precisely referred
to as a "merger of equals". The firms are
often of about the same size. Both
companies' stocks are surrendered and newcompany stock is issued in its place.
Source: http://en.wikipedia.org/wiki/Mergers_and_acquisitions#Distinction_between_mergers_and_acquisitions
8/3/2019 U7- Merger and Acquisitions
6/20
In practice
Actual mergers ofequals don'thappen very often.
Usually, one company will buyanotherand, as part of the deal's
terms, simply allow the acquired
firm to proclaim that the action isa mergerofequals, even if it is
technically an acquisition.
8/3/2019 U7- Merger and Acquisitions
7/20
Ways to acquire a company
A Raidor
A TakeoverBid
8/3/2019 U7- Merger and Acquisitions
8/20
Ways to acquire a company
A RaidBuying as many of acompanys stocks as possible
on the stock market.
8/3/2019 U7- Merger and Acquisitions
9/20
Ways to acquire a company
A takeoverBidA public offer to a companysstockholders to buy their
stocks a a certain price during
a limited period of time.
8/3/2019 U7- Merger and Acquisitions
10/20
Types of MergersHorizontal
Two companies making the same
products combined
Vertical
A company either acquires or merges withanother company in an immediately-
related stage of production and
distribution.
Diversification
A company acquires another company in
an entirely different sphere.
8/3/2019 U7- Merger and Acquisitions
11/20
Example
8/3/2019 U7- Merger and Acquisitions
12/20
Example
8/3/2019 U7- Merger and Acquisitions
13/20
Types of Mergers
Reasons forHorizontal Mergers
- To reduce competition- To increase market share
- To acquire additional plants and
equipment- To achieve synergy and economies of
scales
8/3/2019 U7- Merger and Acquisitions
14/20
Types of Mergers
Reasons forVertical Mergers- To guarantee the supply and cost of raw
material and components.
- T
o be closer to the customers, by cuttingout the wholesaler for example and
dealing directly with the retail trade.
Reasons forDiversification Mergers
- To move into a sector which promises
greater growth or profits.
8/3/2019 U7- Merger and Acquisitions
15/20
Types of Mergers
Further classification/ M&A wavesPeriod Name Facet
1889 - 1904 First Wave Horizontal mergers
1916 - 1929 Second Wave Ver tical mergers
1965 - 1989 Third WaveDiversified conglomerate
mergers
1992 - 1998 FourthWave
Congeneric mergers;
Hostile takeovers;
Corporate Raiding
2000 - FifthWave Cross-bordermergers
8/3/2019 U7- Merger and Acquisitions
16/20
Problems with Mergers
Damage of a companys image, goodwill and
share value.
Unmanageable and inefficient structures(such as large conglomerates)
Drainage ofHuman Capital
8/3/2019 U7- Merger and Acquisitions
17/20
Problems with Mergers
8/3/2019 U7- Merger and Acquisitions
18/20
Key terms
Takeover Merger
Acquisition
Araid
Buyout LBOs = Leveraged buyouts
MBO = Management buyouts
Vertical
Horizontal
Horizontal
Diversification
Hostile
8/3/2019 U7- Merger and Acquisitions
19/20
Writing practice
LanguagePractice
Cause and Effect Expressions
Page 50
8/3/2019 U7- Merger and Acquisitions
20/20
Speaking practice
Work in groups of 3 or4 and make a 15-minute
presentation on
REASONS FOR MERGERS
PROBLEMS WITH MERGERS
TYPES OF MERGERS
Top Related