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MERGERS ANDACQUISITIONS

BY:-

RIDHI

KOKILLA SAXENA

SHIKHA SHARMA

MEGHA SHARMA


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INTRODUCTION

TABLE OF CONTENTS

ADVANTAGES OF MERGERS

TYPES OF MERGERS

LIMITATIONS OF MERGERS

TYPES OF ACQUISITIONS

ADVANTAGES OF ACQUISITIONS

1.

5.

2.

3.

4.

6.

Mergers

Acquisitions

1.1

1.2

LIMITATIONS OF ACQUISITIONS7.

EXAMPLES OF M&A8 .


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In a general sense, mergers and acquisitions are very similar

corporate actions - they combine two previously separate firms into a

single legal entity. Significant operational advantages can be obtained

when two firms are combined and, in fact, the goal of most mergers and

acquisitions is to improve company performance and shareholder

value over the long-term.

Although they are often uttered in the same breath and used as

though they were synonymous, the terms merger and acquisition meanslightly different things.

INTRODUCTION


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A transaction where two firms agree to integrate their operations on

a relatively co-equal basis because they have resources and capabilities

that together may creater a competitive advantage.

In business and economics, merger is a combination of twocompanies into one larger company. A merger involves the mutual

decision of two companies to combine and become one entity; it can be

seen as a decision made by two "equals".

MERGERS :-


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A takeover, or acquisition, on the other hand, is characterized by the

purchase of a smaller company by a much larger one. This combination

of "unequals" can produce the same benefits as a merger, but it does not

necessarily have to be a mutual decision. A larger company can initiate a

hostile takeover of a smaller firm, which essentially amounts to buying

the company in the face of resistance from the smaller company's

management.

A transaction where one firm buy another firm with the intent of moreeffectively using a core competence by making the acquired firm a

subsidiary within its portfolio of business.

ACQUISITIONS :-


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TYPES OF MERGERS

Horizontal merger -Two companies that are in directcompetition and share the same product lines and markets.

For example:- Acar manufacturing company merging

with another car manufacturing company.

Vertical merger -A customer and company or a supplierand company.

For example :- A cone supplier merging with an ice

cream maker.


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Market-extension merger - Two companies that

sell the same products in different markets.

Product-extension merger - Two companies sellingdifferent but related products in the same market.

Conglomeration -Two companies that have no commonbusiness areas.

For example, merging of different businesses like

manufacturing of cement products, fertilizer products,

electronic products, insurance investment and advertising

agencies.


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ADVANTAGES OF MERGERS

Economies of scale:- This occurs when a larger firm with

increased output can reduce average costs.

International Competition:- Mergers can help firms dealwith the threat of multinationals and compete on an

international scale.

Entering new markets- Mergers also make it easier for thecompany to enter new markets.


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Monopoly power :-Merger leads to monopolistic controlin the market. In the situation of monopoly, a firm can easily

make adjustment in the supply and price of products and can

also increased the profit of the firm.

Eliminates the competition:-Mergers eliminates severe,intense and wasteful expenditure by different competing

organizations.


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LIMITATIONS OF MERGERS

Expensive


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Hostile Acquisitions :- the company, which is

to be bought has no information about theacquisition. The company, which would be sold is

taken by surprise.

Friendly Acquisitions :- the two companiescooperate with each other and settle matters

related to acquisitions.

TYPES OF ACQUISITIONS


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ADVANTAGES OF ACQUISITIONS

Increased market power:- Acquisition intends to reduce the

competitive balance of the industry.

Overcome barriers to entry:- Acquisitions overcome costly

barriers to entry which may make startups economicallyunattractive.

Diversification:-Acquisition helps the firm to move quickly

into business when the firm currently lacks experience and

depth in industry.Enhancing profitability :- A combination of two or more

companies may result in more than average profitability due to

cost reduction and efficient utilization of resources.


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LIMITATIONS OF ACQUISITIONS

Integration Difficulties:-Differing Financial and control

system can make integration of firm difficult.

Tax Disadvantages:-There are also some tax disadvantagesto acquisition, the main point here being that capital

allowances are not available when purchasing a business

through share acquisitions. Also, the taxable assets of the

company are based on historical data and any differences inthe data can be viewed in the deferred tax liability provision.


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Employee Retention :-In an acquisition, the company will

have employees at both firms performing similar jobs after the

purchase is complete. The buyer commonly fires excess

employees if it has too many workers doing the same tasksafter the buyout. Because employees are concerned about a

future layoff, some employees will start looking for other jobs

or quit after the company announces its acquisition plan.

Duplication:-An acquisition can lead to unnecessary

duplication. When two similar companies are combined, many

of the positions held in one business will be at work in the

other. This leads to two people or departments doing the same

job.


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EXAMPLES OF M&A

VSNL acquired Teleglobe through a deal of $239 million.

Motorola Mobility acquired by Google in $12.5 billion.

Acer acquired US base cloud computing firm IG ware.


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THANK YOU!

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