mna wrd to study

8/2/2019 Mna Wrd to Study

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There are many types of mergers and acquisitions that redefine the business world with new

strategic alliances and improved corporate philosophies. From the business structure perspective,

some of the most common and significant types of mergers and acquisitions are listed below:

Horizontal Merger

This kind of merger exists between two companies who compete in the same industry segment. The

two companies combine their operations and gains strength in terms of improved performance,

increased capital, and enhanced profits. This kind substantially reduces the number of competitors

in the segment and gives a higher edge over competition.

Vertical Merger

Vertical merger is a kind in which two or more companies in the same industry but in different fields

combine together in business. In this form, the companies in merger decide to combine all the

operations and productions under one shelter. It is like encompassing all the requirements and

products of a single industry segment.

Co-Generic Merger

Co-generic merger is a kind in which two or more companies in association are some way or the

other related to the production processes, business markets, or basic required technologies. It

includes the extension of the product line or acquiring components that are all the way required in

the daily operations. This kind offers great opportunities to businesses as it opens a hue gateway to

diversify around a common set of resources and strategic requirements.

Conglomerate Merger

Conglomerate merger is a kind of venture in which two or more companies belonging to different

industrial sectors combine their operations. All the merged companies are no way related to their

kind of business and product line rather their operations overlap that of each other. This is just a

unification of businesses from different verticals under one flagship enterprise or firm.


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In business, a takeover is the purchase of onecompany(the target) by another (the acquirer, or

bidder). In theUK, the term refers to the acquisition of a public company whose shares are listed on

a stock exchange, in contrast to theacquisitionof aprivate company.

Friendly takeovers

Before a bidder makes anofferfor 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

shareholdersbetter than rejecting it, it recommends the offer be accepted by the shareholders.

In a private company, because the shareholders and the board are usually the same people or

closely connected with one another, private acquisitions are usually friendly. If the

shareholders agree to sell the company, then the board is usually of the same mind or

sufficiently under the orders of the equity shareholders to cooperate with the bidder. This

point is not relevant to the UK concept of takeovers, which always involve the acquisition of

a public company.

[edit] Hostile takeovers

A hostile takeover allows a suitor to take over a target company whosemanagementis

unwilling to agree to amergeror 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. Atender offercan be made where the

acquiring company makes a public offer at a fixed price above the current market price.

Tender offers in the United States are regulated by theWilliams Act. An acquiring companycan also engage in aproxy fight, whereby it tries to persuade enough shareholders, usually a

simple majority, to replace the management with a new one which will approve the takeover.

Another method involves quietly purchasing enough stock on the open market, known as a

creeping tender offer, to effect a change in management. In all of these ways, management

resists the acquisition but it is carried out anyway.

The main consequence of a bid being considered hostile is practical rather than legal. If the

board of the target cooperates, the bidder can conduct extensivedue diligenceinto the affairs

of the target company, providing the bidder with a comprehensive analysis of the target

company's finances. In contrast, a hostile bidder will only have more limited, publicly-

available information about the target company available, rendering the bidder vulnerable to

hidden risks regarding the target company's finances. An additional problem is that takeovers

often require loans provided bybanksin order to service the offer, but banks are often less

willing to back a hostile bidder because of the relative lack of information about the target

available to them.

[edit] Reverse takeovers

Main article:Reverse takeover

Areverse takeoveris a type of takeover where a private company acquires a public company.This is usually done at the instigation of the larger, private company, the purpose being for
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the private company to effectivelyfloatitself while avoiding some of the expense and time

involved in a conventionalIPO. However, underAIMrules, a reverse take-over is an

acquisition or acquisitions in a twelve month period which for an AIM company would:

exceed 100% in any of the class tests; or result in a fundamental change in its business, board or voting control; or in the case of an investing company, depart substantially from the investing strategy

stated in its admission document or, where no admission document was produced on

admission, depart substantially from the investing strategy stated in its pre-admission

announcement or, depart substantially from the investing strategy.

An individual or organization-sometimes known ascorporate raider-can purchase a large

fraction of the company's stock and in doing so get enough votes to replace the board of

directors and the CEO. With a new superior management team, the stock is a much more

attractive investment, which would likely result in a price rise and a profit for the corporate

raider and the other shareholders.
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Both of these relate to strategies that are made to grow your business but they differ in

approach. And most of the times which one to choose is not a very straight forward

decision.

What is Vertical Integration?

Vertical integration is the process in which several steps in the production and/or

distribution of a product or service are controlled by a single company or entity, in order to

increase that companys or entitys power in the marketplace.

Types of Vertical Integrations:

There are basically 3 classifications of Vertical Integration namely:

1. Backward integration The example discussed above where in the company tries to own aninput product company. Like a car company owning a company which makes tires.

2. Forward integration Where the business tries to control the post production areas,namely the distribution network. Like a mobile company opening its own Mobile retail chain.

3. Balanced integration You guessed it right, a mix of the above two. A balanced strategy totake advantages of both the worlds.

What is Horizontal Integration?

Much more common and simpler than vertical integration, Horizontal integration (also

known as lateral integration) simply means a strategy to increase your market share by taking

over a similar company. This take over / merger / buyout can be done in the same geography

or probably in other countries to increase your reach.

As per me an apt example of Horizontal Integration will be You Tube, which was taken

over my Google primarily because it had a strong and loyal user base. (There was no rocket

science in technology used at Youtube which Google couldnt have done without taking over,

but yes to increase the viewers was definitely as complex without the takeover.)

Definition of 'Forward Integration'

A business strategy that involves a form of vertical integration whereby activities are expanded to

include control of the direct distribution of its products.

Investopedia explains 'Forward Integration'

A good example of forward integration is when a farmer sells his/her crops at the local market rather

than to a distribution center.


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Definition of 'Backward Integration'

A form of vertical integration that involves the purchase of suppliers. Companies will pursue

backward integration when it will result in improved efficiency and cost savings. For

example, backward integration might cut transportation costs, improve profit margins and

make the firm more competitive.

An example of backward integration would be if a bakery business bought a wheat processor

and a wheat farm.

Both of these relate to strategies that are made to grow your business but they differ in

approach. And most of the times which one to choose is not a very straight forward

decision.

What is Vertical Integration?

Vertical integration is the process in which several steps in the production and/or

distribution of a product or service are controlled by a single company or entity, in order to

increase that companys or entitys power in the marketplace.

Types of Vertical Integrations:

There are basically 3 classifications of Vertical Integration namely:

4.

Backward integration

The example discussed above where in the company tries to own aninput product company. Like a car company owning a company which makes tires.

5. Forward integration Where the business tries to control the post production areas,namely the distribution network. Like a mobile company opening its own Mobile retail chain.

6. Balanced integration You guessed it right, a mix of the above two. A balanced strategy totake advantages of both the worlds.

What is Horizontal Integration?

Much more common and simpler than vertical integration, Horizontal integration (also

known as lateral integration) simply means a strategy to increase your market share by taking

over a similar company. This take over / merger / buyout can be done in the same geographyor probably in other countries to increase your reach.

As per me an apt example of Horizontal Integration will be You Tube, which was taken

over my Google primarily because it had a strong and loyal user base. (There was no rocket

science in technology used at Youtube which Google couldnt have done without taking over,

but yes to increase the viewers was definitely as complex without the takeover.)

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