In a merger, there is often an exchange of stock between the companies where one company issues shares to the shareholders of the other company at a certain ratio. The firm whose shares continue to exist is generally referred to as the acquiring firm while the other is the target firm. Except for synergies, the post-merger value of the two firms is equal to the pre-merger value.
Mergers and acquisitions are common and in some cases necessary for a business to survive in the current global economy. There are a number of factors involved in mergers and acquisitions and they often require the involvement of various advisors, such as investment bankers, lawyers, accountants, and deal managers.
Mergers Overview Mergers and acquisitions are a common strategy for growing a business. A merger occurs when two companies combine to form one entity, while an acquisition results from one business taking over and absorbing another. An acquisition can either be friendly where both parties want the deal to happen or can result in what is commonly known as a hostile takeover.
In this scenario, a company that is not interested in making a deal becomes the target of another entity or group of investors Ojala, These transactions are driven by many factors. KKR use their own money in addition to debt to finance the merger or acquisition of other companies.
In many cases, these private equity buyers restructure the target company and then sell their holdings when the value of the merged company increases to a level where the buyer can make a large profit.
In short, private equity buyers with vast financial resources have a major influence on merger activity. This was partly the result of the interest rate environment; long-term interest rates were producing lower yields than short-term rates. Because of this, banks were Mergers and acquisitions research papers less profit on long-term loans such as mortgages.
These deposits, or assets, can then be used for other investments. Mergers and acquisitions can have far-reaching effects on a business sector as well as on the investors and shareholders of companies in a particular sector.
There are a number of ways that mergers and acquisitions can create value for shareholders. Logistics of M Due Diligence Mergers do not occur overnight and sometimes take years to be fully implemented.
Preliminary work involves a great deal of legal and other activity, and much of the effort in the early stages focuses on due diligence. This means that the buyer and the seller, as well as their advisors, need to do their homework.
The buyer needs to learn as much as possible about the target company in order to adequately determine the appropriate purchase price. The buyer also needs to be familiar with the condition of the target company as well as any potentially bad financial situations, managerial problems, pending lawsuits, sales forecasts, and contingent liabilities Parr, These are liabilities that will be incurred only when assets are sold, and these include costs for assets or income tax on capital gains realized through the sale of assets.
While the buyer needs to rely on the information being provided by the seller and any other information that might be otherwise available, sellers also need to perform due diligence before they provide information to prospective buyers and "the seller should control the information flow" Parr,p.
In order to do so, the seller needs to know as much as possible about the target company so that there are no surprises during the negotiation and to ensure that material information is not concealed from the buyer.
If a buyer uncovers onerous information about a target that was not provided by the seller, a potential merger transaction can quickly unravel Parr, Confidentiality A deal can also unravel if confidential information finds its way to the public.
In the course of performing due diligence, a great deal of information is exchanged and it is often the case that this information is confidential and may not be available to the public. Finally, successful deal-making also requires the merging companies to share the same core values and this is as important as their desire for a strategic alliance.
While the merger might make sense in terms of products, technologies, and numbers, companies that do not share the same values ultimately will be not be able to survive a merger.
Finally, a successful merger is one that is priced correctly. This requires that a buyer avoid the "negotiating frenzy" that sometimes arises in a competitive merger market and this ultimately rests on a buyer having performed sufficient due diligence Welch, According to Alistair Corbett, a partner of Bain and Company, an example of a dealmaker that has been successful in creating shareholder value is Power Financial.
Further, advisors have knowledge of various dynamics affecting a particular merger market, and they are familiar with techniques that contribute to structuring the finance and determining the correct price of a transaction Holliday, While companies like the Blackstone Group and KKR act as private equity buyers in some merger transactions, The entire section is 4, words.This paper presents the issues with mergers and acquisitions and discusses the methods to make M&As more successful in an attempt to determine if they are helpful or harmful to the companies, their shareholders, and the economy as a whole.
payment for corporate acquisitions conveys valuable information to the market participants. Leland/Pyle () develop a simple model of capital structure and financial equilibrium in which entrepreneurs seek financing for their projects whose true values are known only to them.
This paper will examine the sensible and dubious reasons for mergers and acquisitions and the benefits and costs of the cash and stock transactions.
Viewed from the perspective of the players on the economic markets, mergers and acquisitions, known as M&As, are external growth strategies that enable entities to develop their businesses by leveraging the financial, human, or economic resources of other companies. Research Paper On Merger And Acquisition In Banking Sector In India. Click on any of the term papers to read a brief synopsis of the research paper. The essay synopsis includes the number of pages and sources cited in the paper. CREDIT COLLECTIONS, MERGERS AND ACQUISITIONS. Mergers and Acquisitions: Cases and Materials, Second Edition is a concise, accessible, practical, and student-friendly presentation of everything law students need to know about mergers and acquisitions in order to hit the ground running in a transactional setting.
Mergers and Acquisitions According to Florida Incorporation, a merger is the statutory combination of two or more corporations in which one of the corporations survives and the other corporations cease to exist. Mergers and acquisitions research papers to investigates.
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Mergers & acquisitions research: A bibliometric study of top strategy and international business journals ABSTRACT Mergers and acquisitions (M&As) are important modes through which firms In this paper we will refer to M&As as a phenomena, although mergers and acquisitions are actually conceptually different.
A merger is the.