Download - Merger and acquisition
Merger and
acquisition
Financial University under the Government of the Russian
Federation
Ruhulla Abdul
1st year IFF student
Moscow
2014
LEARNING GOALS
• Explanation of the difference between mergers and takeovers
• Main motives for merger or takeover
• Types of M&A
• Historical overview
• Main problems of M&A
Ruhulla Abdul
Financial University under the Government of the Russian Federation
Mergers and takeovers
Merger: Two or more businesses join
together and operate as one organization
with shared management
Ruhulla Abdul
Financial University under the Government of the Russian Federation
Takeover: One business acquires or
controls another in management through
buying over 51% of the shares
A B C A B A
Motives of mergers and takeovers
• Quick way of expansion
• Cheaper than internal growth
• Costs saving by cross selling
• Cash available
• Economy of scale
• Consolidating market position
• Greater efficiency
• Globalization
• Diversification
• …
Ruhulla Abdul
Financial University under the Government of the Russian Federation
Types of Mergers
Ruhulla Abdul
Financial University under the Government of the Russian Federation
• Horizontal Merger: A merger occurring between companies in the same industry (substitutes)
• Vertical Merger: A merger between two companies producing different goods or services for one specific finished product (complements)
• Conglomerate: A merger between firms that are involved in totally unrelated business activities
• Market Extension Mergers: A market extension merger takes place between two companies that deal in the same products but in separate markets
• Product Extension Mergers: A product extension merger takes place between two business organizations that deal in products that are related to each other and operate in the same market
Types of Acquisitions
• Friendly acquisition: Both the companies approve of the acquisition under friendly terms. There is no forceful acquisition and the entire process is cordial.
• Hostile acquisition: The smaller company is either driven to such a condition that it has no option but to say yes to the acquisition to save its skin or the bigger company just buys off all its share, their by establishing majority and hence initiating the acquisition.
• Reverse acquisition: A private company takes over a public company.
• Back flip acquisition: A very rare case of acquisition in which, the purchasing company becomes a subsidiary of the purchased company.
Ruhulla Abdul
Financial University under the Government of the Russian Federation
Ruhulla Abdul
Financial University under the Government of the Russian Federation
Mergers and Acquisitions
Percentage of Public Companies Taken Over Each Quarter, 1926–2005
History affects the rise and fall of prices
Source: Martinova and
Renneboog 2008
Ruhulla Abdul
Financial University under the Government of the Russian Federation
Mergers and Acquisitions
Martinova and Renneboog 2008
Present History
Source: The New York Times
Ruhulla Abdul
Financial University under the Government of the Russian Federation
Why M&A fail
Ruhulla Abdul
Financial University under the Government of the Russian Federation
Conclusion
Ruhulla Abdul
Financial University under the Government of the Russian Federation
But remember, not all mergers fail. Size and global
reach can be advantageous, and strong managers
can often get greater efficiency from this deal.
Nevertheless, the promises made by deal makers
demand the careful analysis of investors. The success
of mergers depends on how realistic the deal makers
are and how well they can integrate two companies
while maintaining day-to-day operations
Thank You
Ruhulla Abdul
Financial University under the Government of the Russian Federation