Notes On Mergers And Acquisitions

Mergers and acquisitions have become a growing trend for companies to inorganically grow a business within its particular industry. There are many goals that companies may be looking to achieve by doing this, but the main reason is to guarantee long-term and profitable growth for their business. Companies have to keep up with a rapidly increasing global market and increased competition. With the struggle for competitive advantage becoming stronger and stronger, it is almost essential to achieve these mergers. Through research I will attempt to dissect the best practices for achieving merger success.

Look up at the sky, it's a bird, it's a plane, no it really is a plain. All across the United States and all over the world there are a number of companies that are constantly seeking to expand each by a number of different means; some companies are going public, others are buying assets from other companies, and some companies are merging. Mergers happen every day whether we realize it or not there are a number of different smaller companies out there that either by or acquire another company's assets or acquire the whole company itself. The whole merger process can be complicated and also can be quite simple one company seeks to expand and another cease to liquidate some assets, the reasons for this are as different as each company. One

Identify some differences between a merger and an acquisition? What are the different types of mergers/acquisitions (for instance, Starbucks purchasing a coffee bean farm would be a what?)? Make sure to provide an example of each type. Identify and explain some defenses to acquisition. What are the financial statement rules with respect to acquisitions?

The merger activities have presented upwards or downwards trends and created some specific merger waves. A series of merger waves has been witnessed to in numerous countries. For example, the merger waves of the US, with a worldwide economic impact, have been characterized by five major waves or periods of typical merger activities process (Drogalas et al, 2006).

The United States’ market for mergers and acquisitions formally began at the dawn of the 20th century, when industry began to evolve and capital needed to be more efficiently allocated. Economic historians and academics alike have concluded that the market advanced to its current stage through a series of cycles, the first of which began in the early 1900s, that occurred due to technological advances, disproportionate cash flows, and capital displacements. As the economy developed, the market for mergers grew and became more convoluted due to growing consumer bases in virtually all industries and a need for more efficient markets and lower costs.

According to the literature we are assuming that markets are efficient and in-general manager focus on the question whether mergers on average add or destroy shareholders value. Known that corporate managers have two choices of growth, organic growth and

Mergers and acquisitions refer to the financing, management and strategy that is involved in the selling and buying companies. It also include combining two or more companies. A merger is a combination of two companies where they are joined to form a new company and an acquisition occurs when a company buys another and become their owner. It usually starts with the informal discussion at the board level, followed by formal negotiation, a letter of intent, due diligence, agreement and finally the execution of the deal and transfer of payment.

A Merger and an Acquisition are two different processes. The results can be similar in the end but the the ways the both processes work are different;

Investment banking is a highly regulated and complex sector that can be broken down into three main principle businesses comprising of the Investment Banking Division, Trading Division and Asset Management. First of all, the investment banking division can be sub divided into two basic groups called product group and client coverage group. The primary focus of these two groups are to perform mergers and acquisitions transaction advisory and financing arrangement for clients. The two main groups in the product group are the mergers and acquisitions group and the capital markets group. In the mergers and acquisitions group, there are five main products which is the “sell side” assignment, “buy side” assignment, merger of equals joint venture, public market separation and hostile defense. The “sell side” transaction involves the sale, merger or disposition of an entire company or any of its divisions and assets. The “buy side” transaction involves the purchase of an entire company or any of its divisions and assets. The “sell side” transaction typically have the highest priority due to its higher probability of completion compared to the “buy side” transactions. Merger of equals joint ventures is the merging of two companies of roughly equal assets that have a comparable market value. This allows the two companies to form a new and stronger entity to initiate economic activity together with their shared assets. Public market separation requires reorganization such as trading

In modern business environments, there are increasing dynamics encouraging firms to utilize mergers and acquisitions to resolve resource. In dynamic business environments, the value of existing resources is subject to erosion, in some instances fast erosion. Consequently, firms continuously respond to changing environmental conditions by upgrading their resources and capabilities via renewal, acquisition, redeployment, and recombination. Mergers and acquisitions provide firms with a practical tool to close their resource gaps, allowing for a much faster reconfiguration of the product mix toward high-profit products than, for example, internal development (Eschen and Bresser, 2005). The need for corporate firms to achieve competitive advantage in a highly competitive global environment has necessitated the implementation of innovative strategies, one of them being mergers and acquisitions (Rizvi, 2010).

Motives for mergers and acquisitions: in economic terms a merger or acquisition will only be worthwhile if combining the two businesses will lead to gains which would not arise if the two business stayed apart. In financial terms, the present value of bidding business plus, the present value of target business plus, a gain in terms of increased income or reduced expenses from combining (Samuels, wilikes and brayshaw, 1996).

Controlling uncertainty, realizing economy of scale, enhanced product offering, synergy to be gained or acquiring a capability not previously realized? There are a number of different reasons why a company may attempt to merge or acquire another. For all the various explanations out there in the end the simplest explanation is the best. It is all about the money. Greater efficiencies, outputs, tax breaks, complementary products, vertical integration can all translate to money.

The modern world has seen the formation of firms as a mechanism of integration, which enables individuals to develop an enterprise and to combine capital and expertise from different individuals. Mergers, especially the mega-mergers, change the market structure. Mergers and Acquisitions (M&A) have unparalleled capability to transform firm and supplement corporate renewal. Research in M&A has been done taking into consideration a multitude of disciplines, e.g. finance, economics, law, business, strategy formulation, organization theory, human resource management and sociology. M&A becomes a real time phenomenon due to the attention it receives from different walk of life.

Literature on theories of M&A shows that the motives of companies incorporates M&A ,are gaining operating and financial synergy, diversification gaining economic of scale, increasing the market power and the increase of shareholders values.

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.