Presented by :- Japneet Singh

Merger and Acquisitions and

its valuation

A general term used to refer to the consolidation of companies.

A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed.

Merger and acquisition is a corporate strategy that can help an enterprise grow rapidly.

Definition of 'Mergers And Acquisitions -

M&A

Horizontal merger - two companies that are in direct competition and share the same product lines and markets.

Vertical merger - a customer and company or a supplier and company.

Market-extension merger - two companies that sell the same products in different markets.

Product-extension merger - two companies selling different but related products in the same market.

Conglomeration - two companies that have no common business areas.

Types of mergers

The main idea for M&A is 1+1=3

Motives for M&A - operating synergy - financial synergy - diversification - economic motives - horizontal integration - vertical integration - tax motives

Synergy

Book value Liquidation value - the sale of

assets at a point in time. Replacement-cost value Market value of traded

securities Goodwill Discounted Cash Flow

Business Valuationmethods

Review of Literature

This paper summarizes information on how corporate business entity can be valued for mergers and acquisitions.

It shows what business valuations really is, and how it is used while mergers and acquisitions.

Different methods can be used for different companies, however DCF method is the most advanced method and is widely used these days.

“Business Valuation in

Mergers and Acquisitions”

by Marek Malucha

Uniwersytet Szczeciński

Wydział Nauk Ekonomicznych i

Zarządzania

In India, more recently during the year of booming markets 204 to 2010,merger and acquisition activity was as its peak.

During the years 2003 to 2007 the amount involved in acquisitions rose from Rs.23, 787 crores in 2003. to Rs.60,282 crores in 2005 and jumped to Rs. 2.04 lakh crores in 2007.

Industry wise, the major activity was seen in acquisitions in the IT sector, chemicals, pharmaceuticals, metal, oil, BPO and related activities.

Overall corporate restructuring helps in the development of country, organization and there by employees of the organization

MERGERS AND ACQUISITIONS AND THEIR IMPACT ONINDIA AFTER GLOBALIZATION

by L.S. Patankar and S.R. ChavanSOCIAL GROWTH

Vol. II, Issue : II, May 2011 to Oct. 2011

“Cultural fit”, i.e. compatibility of national and organizational cultures, in M&As and its crucial role regarding M&A success.

Some authors consider cultural fit as even more important than strategic fit.

Cultural differences cause a lower level of social integration.

Cultural diversity can create barriers for achieving socio-cultural integration.

Appropriate management of cultural differences can reduce problems deriving form cultural diversity

MERGERS AND ACQUISITIONS,

INTEGRATION AND CULTURE:

by DAUBER, Daniel

Vienna, 24th-26th of June, 2009

Most common errors in valuation are:- Wrong risk free rate used for

valuation. Wrong beta used for valuation. Wrong calculation of WACC Wrong calculation of cash flows. Error in calculating terminal

value.

Company valuation methods, The most common errors in valuation

byPablo Fernandez

University of NavaraRev. February , 2007

In this paper the influence of M&A on the financial performance of the surviving company has been tested by considering Pre and Post M&A financial ratios for the entire set of sample firms.

FindingsThere is insignificant improvement in return on equity,

expenses to income, earning per share and dividend per share post-merger.

There is no significance difference in the defined financial performance standards between pre-merger and post-merger

POST MERGER AND ACQUISITION FINANCIAL PERFORMANCEANALYSIS : A CASE STUDY OF SELECT INDIAN AIRLINE

COMPANIESby

Mahesh R. & Daddikar Prasad,

For this paper, three Nigerian banks were selected using convenience and judgmental sample selection methods.

It was found that the post mergers and acquisitions’ period was more financially efficient than the pre-mergers and acquisitions period.

However, to increase banks financial efficiency, the study recommend that banks should be more aggressive in their profit drive for improved financial position to reap the benefit of post mergers and acquisitions bid.

Comparative analysis of the impact of mergers andacquisitions on financial efficiency of banks in Nigeria

byOkpanachi Joshua

Nigerian Defence Academy, Kaduna, Nigeria.

The purpose of this paper has been to examine the acquiring companies’ short-term abnormal return around the announcement date of a transaction and to determine how these abnormal returns are related to the companies’ choice of methods of payment.

The sample consisted of UK transactions, covering the years 1991, 1995, and 1999.

Stock transactions no longer lead to negative abnormal returns over the announcement period, but achieve highly significant positive abnormal returns.

MERGERS AND ACQUISITIONS:THE INFLUENCE OF METHODS OF PAYMENT

ON BIDDER’S SHARE PRICEby

R Chatterjee and A KuenziUniversity of Cambridge