Background And Design : The United States ' Market For Mergers

Mergers and takeovers are forms of external growth within a business. External growth occurs when one firm decides to expand by joining together with another. A takeover specifically refers to the gaining control of a firm by acquiring a controlling interest in its shares (51%). Merger, on the other hand, means the joining with another firm to form a new combined enterprise, shares in each firm are exchanged for shares in the other.

AN example, in 2008, Hewlett Packet purchased Electronic Data Systems to enhance the services aspect of the partnering technology offerings (Yurko, 1996). Marketing networks now give companies much wider customer access including overnight services. One such merger is the Takeda Pharmaceutical Inc. Although distribution chains work great to increase the bottom line, these mergers are not well received by federal agencies like the Federal Trade Commission. The concern being monopolization which is when one company controls too much of a given industry. Another driver of mergers is a desire for a leadership change. Sometimes the owner of the high technology firms simply wants to sale out and has problems finding a successor within to take the helm. Hence, a merger holds an

In regards to acquisitions, it is important to distinguish between mergers and acquisitions. In a merger, two companies come together and create a new entity. In an acquisition, one company buys another one and manages it consistent with the acquirer’s needs. An acquisition that involves integration has greater staffing implications than one that involves separation (Rizvi, 2008). A combining of companies is a major change. Mergers and acquisitions represent the end of the gamut of options companies have in combining with each other. It is the mergers and acquisitions that are the combinations that have the greatest implications for size of investment, control, integration requirements, pains of separation, and people management issues

Any M&A transaction in the financial crisis is the evidence of the fact that the participants find serious advantages of its

Mergers and Acquisitions (M&A) is a precise significant strategic interchange to sustain in competitiveness within the global market and it turns out to be one of a popular tools for corporate-level strategy. M&A is the amalgamation of two corporate entities to convert into solitary legitimate entity by combining resources and capabilities in order to attain a competitive advantage. Merger typically means reunion two particular companies together on equivalent basic whereas acquisition ordinarily means a greater sized corporation procuring a smaller sized corporation. The M&A activity has been continuously increased over the last 100 years and this phenomena is described by several M&A ‘waves’ (refer to Table 1).

Mergers and acquisitions, better known as M&A, is a “…term used to refer to the consolidation of companies” (Investopedia, 2014). “Mergers can allow companies to combine forces and stake out a greater portion of market share” (Alli, 2010). A company may choose to merge with or acquire another company for a multitude of reasons such as “…maximize[ing] shareholder value. (Ferris & Petitt, 2013)”

Mergers occur on a regular basis and raise integration challenges not only in relation to the actual work performed but for all staff members. Multi-national mergers can be even more challenging due to distance, the different national cultures, and different management styles.

In the vast and voracious business world, attention from media as well as corporations themselves have been predominantly focused on the phenomena that is mergers and acquisitions, undoubtedly due to the sheer volume and frequency of merger and acquisition activity in the past couple of decades. Yet, societies appetite analyzing mergers have been documented as far back as the merger waves of 1898–1902 (Nelson 1959)

Asquith(1983) argue that the previous studies, Dodd(1980) and Langetieg (1978), did not examine the possible changes in value and the market’s complete reaction during the merger process, and did not resolved the question whether the target firm’s stockholders gain averagely from merger. He point out that Langetieg (1978) just focus on the merger date as the event date, thus ignore the stock markets’ response in the

Nowadays mergers and acquisitions are regarded as a key strategic option for the organisations all over the world. According to Huang and Kleiner (2004) mergers and acquisitions have become the principal means by which companies have the opportunity to grow revenues due to factors such as gloabalisation, rapid technological changes, a long-term bull market and strategic barriers to growth. Porter and Singh (2010) admit that mergers and acquisitions play an important role in reallocation of resources in an economy. Despite the huge increase of corporate mergers and acquisitions during the last decades many surveys show that the majority of them fail (Nguyen and Kleiner 2003).The purpose of this essay is to give a brief overview of mergers

When we talk about acquisitions or takeovers, we are talking about a number of different transactions. These transactions can range from one firm merging with another firm to create a new firm to managers of a firm acquiring the firm from its stockholders and creating a private firm. We begin this section by looking at the different forms taken by takeovers.

While terms of merger either acquisition are commonly used to define a wide range of transactions, in fact, they are all different according to specific conditions of each. Therefore, researches distinguish M&A activity according to its nature. Amit R. (1989) classifies three main types of mergers on a basis of target firm’s nature: anticipated bankruptcy of a target firm; exceptional performance or high liquidity of a target; and target firm being a remainder of a greater one. However, this generalised classification is not widely adopted by researchers which rather prefer to employ a conventional classification or, to be more precise, they classify and sub-classify M&A by their perspectives.

Growth: Mergers can give the acquiring company an opportunity to grow market share without having to really earn it by doing the work themselves - instead, they buy a competitor 's business for a price. Usually, these are called horizontal mergers. For example, a beer company may choose to buy out a smaller competing brewery, enabling the smaller company to make more beer and sell more to its brand-loyal customers.

Many reasons such as globalization, technical developments, changing political relations between countries and liberalization cause a compelling and competitive business environment for the companies. This pressure to remain standing in corporate finance world makes companies to be in quest of rapidly effective ways to gain strenght and expand their business activities. At this point, Mergers and Acquisitions, which are two of the essential activities in capital markets to restructe a corporation or business activities and to achieve economic growth and reinforcement, can be counted as two of the mainstream activities of the today 's business world because of its advantages and immediate effects.

This section begins with a description of the process in constructing the sample used for the study. To obtain the sample of M&A deals, data was primarily sourced from the Thomson Reuters Securities Data Company (SDC) Platinum Database, a widely used database for M&A studies (Harford, 2005; Popli and Sinha, 2014; Carow et al, 2004). To obtain financial information such as company daily share prices and index level data, the DataStream database was utilized. The section then covers the quantitative methods used to test the hypotheses regarding the performances of first movers and late followers in an M&A wave.