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Graded Discussion Board

Corporate Finance (FIN622)

Dear Students!

This is to inform that Graded Discussion Board (GDB) No. 02 will be opened on August 05, 2015 for discussion and last date for posting your discussion comments will be August 07, 2015.

 

Topic/Area for Discussion

 Mergers & Acquisitions

Views: 498

Replies to This Discussion

Mergers & Acquisitions

Mergers and acquisitions (M&A) are both aspects of strategic management, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture.

Please, be prepare yourself regarding GDB #02

its a difficult topic

The distinction between a "merger" and an "acquisition"

merger and an acquisition has become increasingly blurred in various respects (particularly in terms of the ultimate economic outcome), although it has not completely disappeared in all situations. From a legal point of view,

a merger is a legal consolidation of two companies into one entity,

whereas

an acquisition occurs when one company takes over another and completely establishes itself as the new owner (in which case the target company still exists as an independent legal entity controlled by the acquirer).

Either structure can result in the economic and financial consolidation of the two entities. In practice, a deal that is an acquisition for legal purposes may be euphemistically called a "merger of equals" if both CEOs agree that joining together is in the best interest of both of their companies,

while when the deal is unfriendly (that is, when the target company does not want to be purchased) it is almost always regarded as an "acquisition".

Ignorance While the parties to a merger or acquisition cannot exchange commercially sensitive information prior to being under common ownership, there is enough crucially important and legally permissible preparation work to keep an integration team busy for several months before day one. Most chief executives don’t know this and they waste the time that could be put to good use while they await clearance from the regulatory authorities. Good preparation means the integration can kick off on day one. Speed matters.

  1. No common vision In the absence of a clear statement of what the merged company will stand for, how the organisation will operate, what it will feel like, and what will be different compared to how things are today, there is no point of the convergence on the horizon and the organisations will never blend.
  2. Nasty surprises resulting from poor due diligence This sounds basic, but happens so often.
  3. Team resourcing Resource requirements are very often underestimated. It can take two or three months to release the best players from daily business to join the integration team(s), find a backfill for them, sign up contractors to fill the gaps and set up the team’s infrastructure. Most companies start too late and are not ready on once the deal is completed.
  4. Poor governance Lack of clarity as to who decides what, and no clear issue resolution process. Integrating organisations brings up a myriad of issues that need fast resolution or else the project comes to a stand-still. Again: speed matters, but with a sound decision-making process.
  5. Poor communication Messages too frequently lack relevance to their audience and often hover at the strategic level when what employees want to know is why the organisation is merging, why a merger is the best course action it could take, in what way the company will be better after the merger, how it will “feel”, how the merger will affect their work and what support they will receive if they are adversely impacted.
  6. Poor programme management Insufficiently detailed implementation plans and failure to identify key interdependencies between the many workstreams brings the project to a halt, or requires costly rework, extends the integration timeline and causes frustration.
  7. Lack of courage Delaying some of the tough decisions that are required to integrate two organisations can only result in a disappointing outcome. Making those decisions will not please everyone, but it has the advantage of clarity and honesty, and allows those who do not find the journey and destination appealing to step off before the train gathers too much speed.
  8. Weak leadership Integrating two organisations is like sailing through a storm: you need a strong captain, someone whom everyone can trust to bring the ship to its destination, someone who projects energy, enthusiasm, clarity, and who communicates that energy to everyone. If senior managers do not walk the talk, if their behaviours and ways of working do not match the vision and values the company aspires to, all credibility is lost and the merger’s mission is reduced to meaningless words.
  9. Lost baby with bathwater Companies contemplating a merger or acquisition too often omit to pinpoint what particular attributes make the other party attractive, and to define how they will ensure those attributes will not get lost when the organisation and the culture have changed. Culture cannot be bought – it needs to be embraced. reply also include in this belong.

MERGERS AND ACQUISITIONS

A merger or acquisition is a combination of two companies where one corporation is completely absorbed by another corporation. The less important company loses its identity and becomes part of the more important corporation, which retains its identity. A merger extinguishes the merged corporation, and the surviving corporation assumes all the rights, privileges, and liabilities of the merged corporation. A merger is not the same as a consolidation, in which two corporations lose their separate identities and unite to form a completely new corporation.

Federal and state laws regulate mergers and acquisitions. Regulation is based on the concern that mergers inevitably eliminate competition between the merging firms. This concern is most acute where the participants are direct rivals, because courts often presume that such arrangements are more prone to restrict output and to increase prices. The fear that mergers and acquisitions reduce competition has meant that the government carefully scrutinizes proposed mergers. On the other hand, since the 1980s, the federal government has become less aggressive in seeking the prevention of mergers.

Despite concerns about a lessening of competition, U.S. law has left firms relatively free to buy or sell entire companies or specific parts of a company. Mergers and acquisitions often result in a number of social benefits. Mergers can bring better management or technical skill to bear on underused assets. They also can produce economies of scale and scope that reduce costs, improve quality, and increase output. The possibility of a takeover can discourage company managers from behaving in ways that fail to maximize profits. A merger can enable a business owner to sell the firm to someone who is already familiar with the industry and who would be in a better position to pay the highest price. The prospect of a lucrative sale induces entrepreneurs to form new firms. Finally, many mergers pose few risks to competition.

Antitrust merger law seeks to prohibit transactions whose probable anticompetitive consequences outweigh their likely benefits. The critical time for review usually is when the merger is first proposed. This requires enforcement agencies and courts to forecast market trends and future effects. Merger cases examine past events or periods to understand each merging party's position in its market and to predict the merger's competitive impact.

kisi ny b GDB nahi ki abi tak... ?????? No comment???

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