Do Shareholders of Acquiring Firms Gain from Acquisitions?

This paper is about two companies that went through same type of change (merger and acquisition) with different outcomes. Merger is combination of two or more companies in which the assets and liabilities of the selling firms are absorbed by the buying firm. Although the buying firm may be a considerably different organization after the merger, it retains its original identity while Acquisition is the purchase of an asset or an entire company (Sherman, A. J., & Hart, M. A. (2005). Chapter 1: The Basics of Mergers and Acquisitions. In, Mergers & Acquisitions from A to Z. American Management Association International.).

This article was published in the Journal of Economic Perspectives and it was written by two Assistant Professors of Economics: Nancy Qian and Nathan Nunn. The former taught at Yale

In this chapter, we first provide coverage of expansion through corporate takeovers and an overview of the consolidation process. Then we present the acquisition method of accounting for business combinations followed by limited coverage of the purchase method and pooling of interests provided in a separate sections.

This research is being submitted on June 14, 2010, for Mr. Bergeen’s Microeconomics course at Rasmen College by John Divler.

Major companies and corporations that comprise a big part of the United States economy take advantage of certain opportunities such as going public through IPO’s, acquisitions, and mergers. These three approaches provide an additional resource and many times an advantage to expand, become more profitable, or simply save a company’s existence.

Hostile takeovers are no longer common as they were in the 1980s. However, legal and ethical issues still surround mergers and takeovers (Thomas, 2009). This document examines and identifies legal and ethical issues which the merging parties should consider before, during and after a merger. The document will also look at measures of managing these legal and ethical issues.

Companies purchase ownership in other firms as a course of business. These events create concerns among investors and employees. Employees wonder what impact the purchase will have on their jobs. Investors wonder what impact the purchase will have on the value of their securities. After the purchase, the company must determine how revenue needs to be reported for the investing company. Many companies find that they must use the equity method to report revenue earned by the main company.

Haspeslagh and Jemison (1987), argue that what determines the success of a acquisition is not the actual purchase itself, but the development of the acquisition strategy the supports. Unfortunately, many executives face the acquisitions as an end, not a means to achieve that end. According to this author, the acquisition is only one strategy business growth. There are others as internal growth, joint venture, partnership, franchise and strategic alliance. All should be evaluated by the company before implementing a business development strategy. A proper analysis of the acquisition goes beyond the study's own candidate company. It must include a contribution from the analysis of potential acquisition for the strategic development, as well as

An acquirer is the organization that is purchasing an organization in an acquisition. Usually it has been seen that the stock price of the acquirer drops down while acquiring an organization. The decrease is due to the uncertainty of the transactions and the acquirer would pay usually a premium for the purchase (Berk and DeMarzo, 2007). In the given case study, Fortunis resource limited is the legal acquirer and acquired Mpire Media with an amount of $6 million. The company has fully acquired the company in the 30 April, 2015. An acquirer can charge a monthly or/and transaction fee to the organization to facilitate transactions. However, Fortunis resource limited acquired Tech Mpire Media with the aim of development and success in the coming year.

Investors fell into the new crazy idea of the conglomerate. The conglomerate would achieve higher sales and earnings than would have been possible for the independent entities alone. The acquisition process itself could be made to produce growth in earnings per share. The

In the recent finance literature, most empirical analyses of the returns to M&A are based on event studies and the findings from these differ depending on whether the research is focused on the target or the acquiring companies. Varying time frameworks, abnormal return metrics, benchmarks and weighting procedures also make comparisons difficult and measurement of long-term abnormal performance complex. Loderer and Martin (1992) investigate 304 mergers and 155 acquisitions that took place from 1965-1986 and document a negative but statistically insignificant

Acquisitions and mergers is the growth strategy of many companies today. Sometime a company may decide to buy shares in another company while other times a company may decide to acquire the whole company. This paper discusses how Dow Chemical could benefit from the acquisition of DuPont. It will also cover the various accounting methods used.

The purpose of this research paper is to examine the impact to the company’s bottom line of divesting AOL from Time Warner and of selling the AOL Europe holdings. The conversant Time Warner merged with AOL in 2001. This produced a loss in value to both entities. Since the merger, Time Warner has looked at ways to either increase its overall revenue through divesting units or portions of the conglomerate by acquiring other companies to help increase earnings potential. This paper looks at the impact to Time Warner if it divests its AOL unit and also what would be the best way to proceed with selling its AOL Europe holdings. This paper will take a historic perspective on memo 8 and memo 10 on this case study.

Divestitures of corporate asset have a variety of forms, including sell-offs, leveraged buyouts, and spin-offs. A spin-off is a pro-rata distribution of the shares of a firm’s the newly formed subsidiary to the shareholders of the original company (parent company). Unlike other types of divestitures, a spin-off doesn’t involve exchange of cash. In other words, there is no cash transaction taking place in spin off. Therefore, a spin-off is not generated by the company 's motivation of generating cash flow benefits. Nevertheless, spin-off is not a costless transaction. Since a spin-off is associated with the cost of registration, new share distribution and dividend payment. Both the parent company and spun off company traded separately as the consequence of spin-off. Also, the subsidiary operates independently from the parent company. After the spin-off, the shareholders of the parent company hold shares in both the parent company and the subsidiary. Therefore, the performance of parent company and spun off company can be analysing as separate entities.

The list of M&As analysed in this study were extracted from two databases: Bloomberg L.P and Zephyr. The reason for choosing these two sources were the fact that they were the only relevant databases that the researcher had access to. Having two databases gives a more round scope of M&A transactions and the share prices were extracted from Bloomberg L.P as Zephyr do not have any share price information. The criteria of the sample are as follows: the M&A deal was announced between 01/01/2003 and 31/12/2014, the deal to be completed, the acquiring country should be one of the GCC members (Saudi Arabia, Qatar, United Arab Emirates, Kuwait, bahrain, Oman) and finally the acquirer must be a listed company in its country’s stock exchange.