Analysis of Merger Between Hp and Compaq

Collusive synergy (Chatterjee, 1986) and competitor interrelationships (Porter, 1985).Jensen (1984) criticized the monopoly theory. He studied effects of merger announcements, free cash flow hypothesis and merger cancellations on competitors stock. Under the monopoly theory competitors' stocks should rise upon an announcement and drop if the merger is challenged or cancelled. Since competitors’ stocks do not fall on the two latter events Jensen (1984) rejects the monopoly

Merging with another organization has downfalls of destroying wealth from the merger. Considering the buying price is important when merging, spending too much on the merger will impound the value after the merger. Some mergers do not create wealth so capital is lost through the merger. There is no guarantee of financial gain and every formula considered with focus, just as with an acquisition. The final decision dictated by the variables. One company merging with another company takes the debt and losses of those companies in the new formed company.

To evaluate this transaction for the benefits of HP’s shareholders, we use the excess earnings model to forecast HP’s stock price if it standalone, CPQ’s stock price as a separate company and the stock price after the merger. Then we make a comparison between HP’s stock price when it operates alone and the stock price after the merger to make the decision of merger.

The grounds for any merger depend on the competitive nature of both firms. If one firm is highly competitive and tries to

The Consolidated Operating Margin for April resulted in a gain of $699K or a 5.6% margin. The operating margin variance was favorable by $116K when compared to the budgeted operating margin gain of $583K or 5.0%. The leading indicator for April’s better than budgeted performance was higher than budgeted Patient Revenue and a favorable payor mix.

The main weakness of merging the two companies would be with the staff. There would be cultural changes, disengaged staff and moral decreases (Iveybusinessjournal.com, 2015). Reorganization would need to be done to

In addition, like any other merger between two firms, companies benefit from significant cost synergy during the implementation of an acquisition and/or merger with other company. For example, when two companies combine their strengths to complement each other, they restructure their operations and as a result several offices and sites are closed down which leads to the laying off of employees, consolidating services and software applications. All these changes, result in synergy savings for the new company.

Answer: Synergy is by far the most socially justifiable reason for mergers. Synergy occurs when the value of the combined enterprise exceeds the sum of the values of the pre-merger firms. (If synergy exists, the whole is

When companies combine/merge the whole objective is to gain new opportunities, gain market share, grow the business, to become more innovative and to improve product offerings, utilizing/sharing the existing resources and data. From the case

“The operating margin is a margin ratio used to measure a company’s pricing strategy and operating efficiency” (Cleverly and Song, 2011). In order to find the margin, the student had to divide the operating income ($197,605) by the net income ($258,125) and got the operating margin of 76.55% for this year. For the following year, the student also divided the operating income ($204,303) by the net income ($263,469) and got the operating margin of 77.54% for the previous year.

find little evidence of wealth creation, with shareholders of the target firms gaining at the expense of the bidder firms. A merger is said to create value, if the combined value of the bidder or target firm increases on the announcement of the merger (Houston et al., 2001) (Ghosh & Dutta, 2015) (Campa, 2004). Moreover, the synergistic gains hypothesis of corporate acquisitions underlined by Isa & Yap (2004) states that, a combination of two firms will result in a combined gain that is, more than the sum of the value of the individual firm. These gains may be attributed to the increasing efficiencies and synergies of the companies involved.

Like all acquired synergies, only time after the acquisition will provide if the synergy value was benefit to the company (Unknown, 2002).

The previous 959.6m Amoco shares will convert into 633.336m shares of BP ADS equivalent, with the previous 965.6m ADS shares, BP shareholders will take part 60% of the new company, still have majority control over the firm. In this deal, we paid for about 20% premium, which is quite standard and normal. Because synergies from revenue and chemical divisions’ combination are not estimated nor not expected to bring benefit, the main synergy from the merge is 2 billion dollars saving of pretax operating cost. The value we create for our shareholders is $14,840.06 million (Amoco stand-alone value $46,430 million+ synergy $2 billion – price paid for Amoco $33,538.94). But this number is quite sensitive to a lot of factors, such as future energy demand, oil and gas price, industry growth potentials, ultimately affecting Amoco’s stand-alone and synergy valuation. Please

As we can see on attached charts - Market was not too sure about this merger (“On paper, the deal has much to commend it, many outsiders say”. But thorny issues remain, including how to accommodate the strains between consultants and auditors, potential conflicts of interest involving important clients and even the delicate matter of choosing a new name. If the negotiators are not careful, fallout could haunt the combined firm for years to come.) From the time when merger plans were made public Shares of

M&A can benefit companies in various ways and the main advantage is all the potential economies of scale that can arise from the deal (Pettinger, 2012). For example, the firm benefits from cost savings that are associated with marketing and technology.