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PREPARED BY:JAMMIE ANN FEL IPE
MERGERS AND ACQUISITIONS
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Merger Defined
The combination of two or more firms to form a single
firm.
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Rationale for mergers
SYNERGYThe condition wherein the
whole is greater than the sum of its parts.
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Rationale for mergers
TAX CONSIDERATION
S
Purchase of Assets below
Their Replacement
Cost
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Rationale for mergers
DiversificationManager’s Personal IncentivesBreak up Value
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Economic Types of mergers
HORIZONTAL MERGERVERTICAL MERGERCONGENERIC MERGERCONGLOMERATE
MERGER
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Hostile vs. friendly turnovers
Acquiring CompanyA company that seeks to acquire another firm.
Target CompanyA firm that another company seeks to acquire.
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Hostile vs. friendly turnovers
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Merger analysis
The acquiring firm Performs an analysis to value the target company and then determines whether the target can be bought at that value or, preferably, for less than the estimated value.
The target company Accept the offer if the price exceeds either its value if it continued to operate independently or the price it could receive from some other bidder.
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Valuing the target firm
Discounted Cash Flow AnalysisMarket Multiple Analysis
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