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Encyclopedia > Mergers and Acquisitions

The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity. Acquisition is a Gnutella-based peer-to-peer and BitTorrent client for Mac OS X. It is based on LimeWire and is a shareware product, priced at $18. ... The starship Enterprise (NX-01) Star Trek: Enterprise is a science fiction television series set in the Star Trek universe. ... Merge, merging, or merger can have several different meanings: In business and economics, a merger is the combination of two companies into one larger company In computer science, either: the merge algorithm which combines two or more sorted lists into a single sorted one the merge sort, a sort algorithm... For other uses, see Management (disambiguation). ... For other uses, see Corporation (disambiguation). ...

Contents

Overview

A merger is a tool used by companies for the purpose of expanding their operations often aiming at an increase of their long term profitability. There are 15 different types of actions that a company can take when deciding to move forward using M&A. Usually mergers occur in a consensual (occurring by mutual consent) setting where executives from the target company help those from the purchaser in a due diligence process to ensure that the deal is beneficial to both parties. Acquisitions can also happen through a hostile takeover by purchasing the majority of outstanding shares of a company in the open market against the wishes of the target's board. In the United States, business laws vary from state to state whereby some companies have limited protection against hostile takeovers. One form of protection against a hostile takeover is the shareholder rights plan, otherwise known as the "poison pill". Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. ... Due diligence is a term used for a number of concepts involving either the performance of an investigation of a business or person, or the performance of an act with a certain standard of care. ... A takeover in business refers to one company (the acquirer, or bidder) purchasing another (the target). ... A stock market is a market for the trading of company stock, and derivatives of same; both of these are securities listed on a stock exchange as well as those only traded privately. ... Federal courts Supreme Court Circuit Courts of Appeal District Courts Elections Presidential elections Midterm elections Political Parties Democratic Republican Third parties State & Local government Governors Legislatures (List) State Courts Local Government Other countries Atlas  US Government Portal      A U.S. state is any one of the fifty subnational entities of... Poison pill originally meant a literal poison pill (often a glass vial of cyanide salts) carried by various spies throughout history, and by Nazi leaders in WWII. Spies could take such pills when discovered, eliminating any possibility that they could be interrogated for the enemys gain. ...


Historically, mergers have often failed (Straub, 2007) to add significantly to the value of the acquiring firm's shares (King, et al., 2004). Corporate mergers may be aimed at reducing market competition, cutting costs (for example, laying off employees, operating at a more technologically efficient scale, etc.), reducing taxes, removing management, "empire building" by the acquiring managers, or other purposes which may or may not be consistent with public policy or public welfare. Thus they can be heavily regulated, for example, in the U.S. requiring approval by both the Federal Trade Commission and the Department of Justice. Competition is the act of striving against others for the purpose of achieving gain, such as income, pride, amusement, or dominance. ... -1... For other uses, see Management (disambiguation). ... | logo_caption = | seal = US-FederalTradeCommission-Seal. ... The Robert F. Kennedy Department of Justice Building in Washington, D.C. “Justice Department” redirects here. ...


The U.S. began their regulation on mergers in 1890 with the implementation of the Sherman Act. It was meant to prevent any attempt to monopolize or to conspire to restrict trade. However, based on the loose interpretation of the standard "Rule of Reason", it was up to the judges in the U.S. Supreme Court whether to rule leniently (as with U.S. Steel in 1920) or strictly (as with Alcoa in 1945). The Sherman Antitrust Act was the first government action to limit trusts (A combination of firms or corporations who agree not to lower prices below a certain rate for the purpose of reducing competition and controlling prices throughout a business or an industry). ... The rule of reason is a doctrine developed by the United States Supreme Court in its interpretation of the Sherman Antitrust Act. ... The Supreme Court Building, Washington, D.C. The Supreme Court Building, Washington, D.C., (large image) The Supreme Court of the United States, located in Washington, D.C., is the highest court (see supreme court) in the United States; that is, it has ultimate judicial authority within the United States... The United States Steel Corporation (NYSE: X) is an integrated steel producer with major production operations in the United States and Central Europe. ... This article is about the company. ...


Acquisition

Main article: Takeover

An acquisition, also known as a takeover, is the buying of one company (the ‘target’) by another. An acquisition may be friendly or hostile. In the former case, the companies cooperate in negotiations; in the latter case, the takeover target is unwilling to be bought or the target's board has no prior knowledge of the offer. Acquisition usually refers to a purchase of a smaller firm by a larger one. Sometimes, however, a smaller firm will acquire management control of a larger or longer established company and keep its name for the combined entity. This is known as a reverse takeover. A takeover in business refers to one company (the acquirer, or bidder) purchasing another (the target). ... A takeover in business refers to one company (the acquirer, or bidder) purchasing another (the target). ... Chairman of the Board redirects here. ... A reverse takeover occurs when a publicly-traded smaller company acquires ownership of a larger company. ...


Types of acquisition

  • The buyer buys the shares, and therefore control, of the target company being purchased. Ownership control of the company in turn conveys effective control over the assets of the company, but since the company is acquired intact as a going business, this form of transaction carries with it all of the liabilities accrued by that business over its past and all of the risks that company faces in its commercial environment.
  • The buyer buys the assets of the target company. The cash the target receives from the sell-off is paid back to its shareholders by dividend or through liquidation. This type of transaction leaves the target company as an empty shell, if the buyer buys out the entire assets. A buyer often structures the transaction as an asset purchase to "cherry-pick" the assets that it wants and leave out the assets and liabilities that it does not. This can be particularly important where foreseeable liabilities may include future, unquantified damage awards such as those that could arise from litigation over defective products, employee benefits or terminations, or environmental damage. A disadvantage of this structure is the tax that many jurisdictions, particularly outside the United States, impose on transfers of the individual assets, whereas stock transactions can frequently be structured as like-kind exchanges or other arrangements that are tax-free or tax-neutral, both to the buyer and to the seller's shareholders.

The terms "demerger", "spin-off" and "spin-out" are sometimes used to indicate a situation where one company splits into two, generating a second company separately listed on a stock exchange. Demerger is the converse of a merger or acquisition. ... A spin-off (or spinoff) is a new organization or entity formed by a split from a larger one such as a new company formed from a university research group. ... The common definition of Spin out (or spin off) is when a division of a company or organization becomes an independent business. ...


Merger

In business or economics a merger is a combination of two companies into one larger company. Such actions are commonly voluntary and involve stock swap or cash payment to the target. Stock swap is often used as it allows the shareholders of the two companies to share the risk involved in the deal. A merger can resemble a takeover but result in a new company name (often combining the names of the original companies) and in new branding; in some cases, terming the combination a "merger" rather than an acquisition is done purely for political or marketing reasons. In economics, a business is a legally-recognized organizational entity existing within an economically free country designed to sell goods and/or services to consumers, usually in an effort to generate profit. ... Face-to-face trading interactions on the New York Stock Exchange trading floor. ... For other uses, see Corporation (disambiguation). ... A stock swap is a business takeover in which the acquiring company uses its own stock to pay for the acquired company. ... A takeover in business refers to one company (the acquirer, or bidder) purchasing another (the target). ... For other uses, see Brand (disambiguation). ...


Classifications of mergers

  • Horizontal mergers take place where the two merging companies produce similar product in the same industry.
  • Vertical mergers occur when two firms, each working at different stages in the production of the same good, combine.
  • Congeneric mergers occur where two merging firms are in the same general industry, but they have no mutual buyer/customer or supplier relationship, such as a merger between a bank and a leasing company. Example: Prudential's acquisition of Bache & Company.
  • Conglomerate mergers take place when the two firms operate in different industries.

A unique type of merger called a reverse merger is used as a way of going public without the expense and time required by an IPO. In microeconomics and strategic management, the term horizontal integration describes a type of ownership and control. ... It has been suggested that Vertical expansion be merged into this article or section. ... Conglomerate is the term used to describe a large company which consists of divisions of often seemingly unrelated businesses. ... A reverse merger is a method by which a private company can become a publicly traded company without the expense and time requirements involved in an initial public offering (IPO). ... Wikipedia does not yet have an article with this exact name. ...


The contract vehicle for achieving a merger is a "merger sub".


The occurrence of a merger often raises concerns in antitrust circles. Devices such as the Herfindahl index can analyze the impact of a merger on a market and what, if any, action could prevent it. Regulatory bodies such as the European Commission, the United States Department of Justice and the U.S. Federal Trade Commission may investigate anti-trust cases for monopolies dangers, and have the power to block mergers. This article is about anti-competitive business behavior. ... The Herfindahl index, also known as Herfindahl-Hirschman Index or HHI, is a measure of the size of firms in relationship to the industry and an indicator of the amount of competition among them. ... Berlaymont, the Commissions seat The European Commission (formally the Commission of the European Communities) is the executive branch of the European Union. ... The Robert F. Kennedy Department of Justice Building in Washington, D.C. “Justice Department” redirects here. ... | logo_caption = | seal = US-FederalTradeCommission-Seal. ... This article is about the economic term. ...


Accretive mergers are those in which an acquiring company's earnings per share (EPS) increase. An alternative way of calculating this is if a company with a high price to earnings ratio (P/E) acquires one with a low P/E. EPS is an initialism which most often means: Earnings per share, a stock market concept. ... In finance, the PE ratio of a stock (also called its earnings multiple, just multiple, or P/E) is calculated as: The price per share (numerator) is the market price of a single share of the stock. ... In finance, the PE ratio of a stock (also called its earnings multiple, just multiple, or P/E) is calculated as: The price per share (numerator) is the market price of a single share of the stock. ...


Dilutive mergers are the opposite of above, whereby a company's EPS decreases. The company will be one with a low P/E acquiring one with a high P/E. EPS is an initialism which most often means: Earnings per share, a stock market concept. ... In finance, the PE ratio of a stock (also called its earnings multiple, just multiple, or P/E) is calculated as: The price per share (numerator) is the market price of a single share of the stock. ... In finance, the PE ratio of a stock (also called its earnings multiple, just multiple, or P/E) is calculated as: The price per share (numerator) is the market price of a single share of the stock. ...


The completion of a merger does not ensure the success of the resulting organization; indeed, many mergers (in some industries, the majority) result in a net loss of value due to problems. Correcting problems caused by incompatibility—whether of technology, equipment, or corporate culture— diverts resources away from new investment, and these problems may be exacerbated by inadequate research or by concealment of losses or liabilities by one of the partners. Overlapping subsidiaries or redundant staff may be allowed to continue, creating inefficiency, and conversely the new management may cut too many operations or personnel, losing expertise and disrupting employee culture. These problems are similar to those encountered in takeovers. For the merger not to be considered a failure, it must increase shareholder value faster than if the companies were separate, or prevent the deterioration of shareholder value more than if the companies were separate. Organizational Culture refers to the values, beliefs and customs of an organization. ... A takeover in business refers to one company (the acquirer, or bidder) purchasing another (the target). ...


Distinction between Mergers and Acquisitions

Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things.


When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded.


In the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals." Both companies' stocks are surrendered and new company stock is issued in its place. For example, both Daimler-Benz and Chrysler ceased to exist when the two firms merged, and a new company, DaimlerChrysler, was created.


In practice, however, actual mergers of equals don't happen very often. Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it's technically an acquisition. Being bought out often carries negative connotations, therefore, by describing the deal as a merger, deal makers and top managers try to make the takeover more palatable.


A purchase deal will also be called a merger when both CEOs agree that joining together is in the best interest of both of their companies. But when the deal is unfriendly - that is, when the target company does not want to be purchased - it is always regarded as an acquisition.


Whether a purchase is considered a merger or an acquisition really depends on whether the purchase is friendly or hostile and how it is announced. In other words, the real difference lies in how the purchase is communicated to and received by the target company's board of directors, employees and shareholders.


Business valuation

The five most common ways to valuate a business are

  • asset valuation,
  • historical earnings valuation,
  • future maintainable earnings valuation,
  • relative valuation (comparable company & comparable transactions),
  • discounted cash flow (DCF) valuation

Professionals who valuate businesses generally do not use just one of these methods but a combination of some of them, as well as possibly others that are not mentioned above, in order to obtain a more accurate value. These values are determined for the most part by looking at a company's balance sheet and/or income statement and withdrawing the appropriate information. The information in the balance sheet or income statement is obtained by one of three accounting measures: a Notice to Reader, a Review Engagement or an Audit. This article needs additional references or sources for verification. ... An Income Statement, also called a Profit and Loss Statement (P&L), is a financial statement for companies that indicates how Revenue (money received from the sale of products and services before expenses are taken out, also known as the top line) is transformed into net income (the result after... It has been suggested that Accounting scholarship be merged into this article or section. ... For other uses, see Audit (disambiguation). ...


Accurate business valuation is one of the most important aspects of M&A as valuations like these will have a major impact on the price that a business will be sold for. Most often this information is expressed in a Letter of Opinion of Value (LOV) when the business is being valuated for interest's sake. There are other, more detailed ways of expressing the value of a business. These reports generally get more detailed and expensive as the size of a company increases, however, this is not always the case as there are many complicated industries which require more attention to detail, regardless of size.


Financing M&A

Mergers are generally differentiated from acquisitions partly by the way in which they are financed and partly by the relative size of the companies. Various methods of financing an M&A deal exist:


Cash

Payment by cash. Such transactions are usually termed acquisitions rather than mergers because the shareholders of the target company are removed from the picture and the target comes under the (indirect) control of the bidder's shareholders alone.


A cash deal would make more sense during a downward trend in the interest rates. Another advantage of using cash for an acquisition is that there tends to lesser chances of EPS dilution for the acquiring company. But a caveat in using cash is that it places constraints on the cash flow of the company.


Financing

Financing capital may be borrowed from a bank, or raised by an issue of bonds. Alternatively, the acquirer's stock may be offered as consideration. Acquisitions financed through debt are known as leveraged buyouts if they take the target private, and the debt will often be moved down onto the balance sheet of the acquired company. A leveraged buyout (or LBO) occurs when a financial sponsor gains control of a majority of a target companys equity through the use of borrowed money or debt. ... This article needs additional references or sources for verification. ...


Hybrids

An acquisition can involve a combination of cash and debt, or a combination of cash and stock of the purchasing entity.


Factoring

Factoring can provide the necessary extra to make a merger or sale work. This article is about finance. ...


Motives behind M&A

These motives are considered to add shareholder value:

  • Synergy: This refers to the fact that the combined company can often reduce duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit.
  • Increased revenue/Increased Market Share: This motive assumes that the company will be absorbing a major competitor and thus increase its power (by capturing increased market share) to set prices.
  • Cross selling: For example, a bank buying a stock broker could then sell its banking products to the stock broker's customers, while the broker can sign up the bank's customers for brokerage accounts. Or, a manufacturer can acquire and sell complementary products.
  • Economies of Scale: For example, managerial economies such as the increased opportunity of managerial specialization. Another example are purchasing economies due to increased order size and associated bulk-buying discounts.
  • Taxes: A profitable company can buy a loss maker to use the target's loss as their advantage by reducing their tax liability. In the United States and many other countries, rules are in place to limit the ability of profitable companies to "shop" for loss making companies, limiting the tax motive of an acquiring company.
  • Geographical or other diversification: This is designed to smooth the earnings results of a company, which over the long term smoothens the stock price of a company, giving conservative investors more confidence in investing in the company. However, this does not always deliver value to shareholders (see below).
  • Resource transfer: resources are unevenly distributed across firms (Barney, 1991) and the interaction of target and acquiring firm resources can create value through either overcoming information asymmetry or by combining scarce resources.

These motives are considered to not add shareholder value: Synergy (from the Greek synergos, συνεργός meaning working together, circa 1660) refers to the phenomenon in which two or more discrete influences or agents acting together create an effect greater than that predicted by knowing only the separate effects of the individual agents. ... For the tax agency in Ireland of the same name, see Revenue Commissioners. ... Cross-selling is the strategy of selling other products to a customer who has already purchased (or signaled their intention to purchase) a product from the vendor. ... For other uses, see Bank (disambiguation). ... A Stock broker sells or buys stock on behalf of a customer. ... The increase in output from Q to Q2 causes a decrease in the average cost of each unit from C to C1. ... -1...

  • Diversification: While this may hedge a company against a downturn in an individual industry it fails to deliver value, since it is possible for individual shareholders to achieve the same hedge by diversifying their portfolios at a much lower cost than those associated with a merger.
  • Manager's hubris: manager's overconfidence about expected synergies from M&A which results in overpayment for the target company.
  • Empire building: Managers have larger companies to manage and hence more power.
  • Manager's compensation: In the past, certain executive management teams had their payout based on the total amount of profit of the company, instead of the profit per share, which would give the team a perverse incentive to buy companies to increase the total profit while decreasing the profit per share (which hurts the owners of the company, the shareholders); although some empirical studies show that compensation is linked to profitability rather than mere profits of the company.
  • Vertical integration: Companies acquire part of a supply chain and benefit from the resources. However, this does not add any value since although one end of the supply chain may receive a product at a cheaper cost, the other end now has lower revenue. In addition, the supplier may find more difficulty in supplying to competitors of its acquirer because the competition would not want to support the new conglomerate.

For the supervillain, see Barry Hubris. ... In political science, empire-building refers to the tendency of countries and nations to acquire resources, land, and economic influence outside of their borders in order to expand their size, power, and wealth. ... A perverse incentive is a term for an incentive that has the opposite effect of that intended. ... It has been suggested that Vertical expansion be merged into this article or section. ... A supply chain, logistics network, or supply network is a coordinated system of organizations, people, activities, information and resources involved in moving a product or service in physical or virtual manner from supplier to customer. ...

M&A marketplace difficulties

No marketplace currently exists for the mergers and acquisitions of privately owned small to mid-sized companies. Market participants often wish to maintain a level of secrecy about their efforts to buy or sell such companies. Their concern for secrecy usually arises from the possible negative reactions a company's employees, bankers, suppliers, customers and others might have if the effort or interest to seek a transaction were to become known. This need for secrecy has thus far thwarted the emergence of a public forum or marketplace to serve as a clearinghouse for this large volume of business. Image File history File links Question_book-3. ... Look up Market in Wiktionary, the free dictionary. ...


At present, the process by which a company is bought or sold can prove difficult, slow and expensive. A transaction typically requires six to nine months and involves many steps. Locating parties with whom to conduct a transaction forms one step in the overall process and perhaps the most difficult one. Qualified and interested buyers of multimillion dollar corporations are hard to find. Even more difficulties attend bringing a number of potential buyers forward simultaneously during negotiations. Potential acquirers in an industry simply cannot effectively "monitor" the economy at large for acquisition opportunities even though some may fit well within their company's operations or plans.


An industry of professional "middlemen" (known variously as intermediaries, business brokers, and investment bankers) exists to facilitate M&A transactions. These professionals do not provide their services cheaply and generally resort to previously-established personal contacts, direct-calling campaigns, and placing advertisements in various media. In servicing their clients they attempt to create a one-time market for a one-time transaction. Certain types of merger and acquisitions transactions involve securities and may require that these "middlemen" be securities licensed in order to be compensated. Many, but not all, transactions use intermediaries on one or both sides. Despite best intentions, intermediaries can operate inefficiently because of the slow and limiting nature of having to rely heavily on telephone communications. Many phone calls fail to contact with the intended party. Busy executives tend to be impatient when dealing with sales calls concerning opportunities in which they have no interest. These marketing problems typify any private negotiated markets. Due to these problems and other problems like these, brokers who deal with small to mid-sized companies often deal with much more strenuous conditions than other business brokers. Mid-sized business brokers have an average life-span of only 12-18 months and usually never grow beyond 1 or 2 employees. Exceptions to this are few and far between. Some of these exceptions include The Sundial Group, Geneva Business Services and Robbinex. To meet Wikipedias quality standards, this article or section may require cleanup. ... For other uses, see Telephone (disambiguation). ... Robbinex Inc. ...


The market inefficiencies can prove detrimental for this important sector of the economy. Beyond the intermediaries' high fees, the current process for mergers and acquisitions has the effect of causing private companies to initially sell their shares at a significant discount relative to what the same company might sell for were it already publicly traded. An important and large sector of the entire economy is held back by the difficulty in conducting corporate M&A (and also in raising equity or debt capital). Furthermore, it is likely that since privately held companies are so difficult to sell they are not sold as often as they might or should be. This article does not cite any references or sources. ... In finance, discounting is the process of finding the current value of an amount of cash at some future date, and along with compounding cash from the basis of time value of money calculations. ... For other uses, see Stock (disambiguation). ... For other uses, see Debt (disambiguation). ...


Previous attempts to streamline the M&A process through computers have failed to succeed on a large scale because they have provided mere "bulletin boards" - static information that advertises one firm's opportunities. Users must still seek other sources for opportunities just as if the bulletin board were not electronic. A multiple listings service concept was previously not used due to the need for confidentiality but there are currently several in operation. The most significant of these are run by the California Association of Business Brokers (CABB) and the International Business Brokers Association (IBBA) These organizations have effectivily created a type of virtual market without compromising the confidentiality of parties involved and without the unauthorized release of information. Look up bulletin board, notice board in Wiktionary, the free dictionary. ... The International Business Brokers Association (IBBA) is the largest international non-profit association operating exclusively for people and firms engaged in business brokerage and mergers and acquisitions. ... The International Business Brokers Association (IBBA) is the largest international non-profit association operating exclusively for people and firms engaged in business brokerage and mergers and acquisitions. ...


One part of the M&A process which can be improved significantly using networked computers is the improved access to "data rooms" during the due diligence process however only for larger transactions. For the purposes of small-medium sized business, these datarooms serve no purpose and are generally not used. Reasons for frequent failure of M&A was analyzed by Thomas Straub in "Reasons for frequent failure in mergers and acquisitions - a comprehensive analysis", DUV Gabler Edition, 2007. Data rooms are used in many different types of transaction where the vendor (in the case of a property, M&A or share sale) or the authority (in the case of a PFI/PPP project) wishes to disclose a large amount of confidential data to proposed bidders typically during the... Due diligence is a term used for a number of concepts involving either the performance of an investigation of a business or person, or the performance of an act with a certain standard of care. ... Data rooms are used in many different types of transaction where the vendor (in the case of a property, M&A or share sale) or the authority (in the case of a PFI/PPP project) wishes to disclose a large amount of confidential data to proposed bidders typically during the...


The Great Merger Movement

The Great Merger Movement was a predominantly U.S. business phenomenon that happened from 1895 to 1905. During this time, small firms with little market share consolidated with similar firms to form large, powerful institutions that dominated their markets. It is estimated that more than 1,800 of these firms disappeared into consolidations, many of which acquired substantial shares of the markets in which they operated. The vehicle used were so-called trusts. To truly understand how large this movement was—in 1900 the value of firms acquired in mergers was 20% of GDP. In 1990 the value was only 3% and from 19982000 is was around 10–11% of GDP. Organizations that commanded the greatest share of the market in 1905 saw that command disintegrate by 1929 as smaller competitors joined forces with each other. However, there were companies that merged during this time such as DuPont, Nabisco, US Steel, and General Electric that have been able to keep their dominance in their respected sectors today due to growing technological advances of their products, patents, and brand recognition by their customers. These companies that merged were consistently mass producers of homogeneous goods that could exploit the efficiencies of large volume production. Companies which had specific fine products, like fine writing paper, earned their profits on high margin rather than volume and took no part in Great Merger Movement. Year 1895 (MDCCCXCV) was a common year starting on Tuesday (link will display full calendar) of the Gregorian calendar (or a common year starting on Sunday of the 12-day-slower Julian calendar). ... For other uses, see 1905 (disambiguation). ... The term trust has several meanings: In sociology, trust is willing acceptance of one persons power to affect another. ... Äž: For the film, see: 1900 (film). ... GDP is an acronym which can stand for more than one thing: (in economics) an abbreviation for Gross Domestic Product. ... This article is about the year. ... Year 1998 (MCMXCVIII) was a common year starting on Thursday (link will display full 1998 Gregorian calendar). ... Year 2000 (MM) was a leap year starting on Saturday (link will display full 2000 Gregorian calendar). ... For other uses, see 1905 (disambiguation). ... Year 1929 (MCMXXIX) was a common year starting on Tuesday (link will display the full calendar) of the Gregorian calendar. ...


Short-run factors

One of the major short run factors that sparked in The Great Merger Movement was the desire to keep prices high. That is, with many firms in a market, supply of the product remains high. During the panic of 1893, the demand declined. When demand for the good falls, as illustrated by the classic supply and demand model, prices are driven down. To avoid this decline in prices, firms found it profitable to collude and manipulate supply to counter any changes in demand for the good. This type of cooperation led to widespread horizontal integration amongst firms of the era. Focusing on mass production allowed firms to reduce unit costs to a much lower rate. These firms usually were capital-intensive and had high fixed costs. Due to the fact of new machines were mostly financed through bonds, interest payments on bonds were high followed by the panic of 1893, yet no firm was willing to accept quantity reduction during this period. Year 1893 (MDCCCXCIII) was a common year starting on Sunday (link will display the full calendar) of the Gregorian calendar (or a common year starting on Tuesday of the 12-day slower Julian calendar). ... Year 1893 (MDCCCXCIII) was a common year starting on Sunday (link will display the full calendar) of the Gregorian calendar (or a common year starting on Tuesday of the 12-day slower Julian calendar). ...


Long-run factors

In the long run, due to the desire to keep costs low, it was advantageous for firms to merge and reduce their transportation costs thus producing and transporting from one location rather than various sites of different companies as in the past. This resulted in shipment directly to market from this one location. In addition, technological changes prior to the merger movement within companies increased the efficient size of plants with capital intensive assembly lines allowing for economies of scale. Thus improved technology and transportation were forerunners to the Great Merger Movement. In part due to competitors as mentioned above, and in part due to the government, however, many of these initially successful mergers were eventually dismantled. The U.S. government passed the Sherman Act in 1890, setting rules against price fixing and monopolies. Starting in the 1890s with such cases as U.S. versus Addyston Pipe and Steel Co., the courts attacked large companies for strategizing with others or within their own companies to maximize profits. Price fixing with competitors created a greater incentive for companies to unite and merge under one name so that they were not competitors anymore and technically not price fixing. The Sherman Antitrust Act was the first government action to limit trusts (A combination of firms or corporations who agree not to lower prices below a certain rate for the purpose of reducing competition and controlling prices throughout a business or an industry). ...


Cross-border M&A

In a study conducted in 2000 by Lehman Brothers, it was found that, on average, large M&A deals cause the domestic currency of the target corporation to appreciate by 1% relative to the acquirer's. For every $1-billion deal, the currency of the target corporation increased in value by 0.5%. More specifically, the report found that in the period immediately after the deal is announced, there is generally a strong upward movement in the target corporation's domestic currency (relative to the acquirer's currency). Fifty days after the announcement, the target currency is then, on average, 1% stronger.[1] Lehman Brothers Holdings Inc. ...


The rise of globalization has exponentially increased the market for cross border M&A. In 1996 alone there were over 2000 cross border transactions worth a total of approximately $256 billion. This rapid increase has taken many M&A firms by surprise because the majority of them never had to consider acquiring the capabilities or skills required to effectively handle this kind of transaction. In the past, the market's lack of significance and a more strictly national mindset prevented the vast majority of small and mid-sized companies from considering cross border intermediation as an option which left M&A firms inexperienced in this field. This same reason also prevented the development of any extensive academic works on the subject. Puxi side of Shanghai, China. ...


Due to the complicated nature of cross border M&A, the vast majority of cross border actions have unsuccessful results. Cross border intermediation has many more levels of complexity to it then regular intermediation seeing as corporate governance, the power of the average employee, company regulations, political factors customer expectations, and countries' culture are all crucial factors that could spoil the transaction.[2][3]


Major M&A in the 1990s

Top 10 M&A deals worldwide by value (in mil. USD) from 1990 to 1999:

Rank Year Purchaser Purchased Transaction value (in mil. USD)
1 1999 Vodafone Airtouch PLC[1] Mannesmann 183,000
2 1999 Pfizer[2] Warner-Lambert 90,000
3 1998 Exxon[3][4] Mobil 77,200
4 1999 Citicorp Travelers Group 73,000
5 1999 SBC Communications Ameritech Corporation 63,000
6 1999 Vodafone Group AirTouch Communications 60,000
7 1998 Bell Atlantic[5] GTE 53,360
8 1998 BP[6] Amoco 53,000
9 1999 Qwest Communications US WEST 48,000
10 1997 Worldcom MCI Communications 42,000

Vodafone Group Plc is a mobile network operator headquartered in Newbury, Berkshire, England. ... Mannesmann AG is a German corporation with headquarters in Duesseldorf. ... Pfizer Incorporated (NYSE: PFE) is a major pharmaceutical company, which ranks number one in the world in sales[2]. The company is based in New York City. ... Pfizer, Incorporated (NYSE: PFE), is a global pharmaceutical company based in New York City. ... This article is about the fuel brand. ... Mobil gas station in the Loisaida section of the East Village of New York City Mobil was a major American oil company which merged with Exxon in 1999 to form ExxonMobil. ... Citibank was founded in 1812 as City Bank of New York. ... Citigroup Inc. ... SBC Communications NYSE: SBC is an American telecommunications company based in San Antonio, Texas. ... Ameritech Corporation (originally American Information Technologies Corporation) was a U.S. telecommunications company that arose out of the 1984 AT&T divestiture. ... Vodafones corporate logo is the outline of a SIM card Vodafone is a multinational mobile phone operator with headquarters in Newbury, Berkshire, United Kingdom and Düsseldorf, Germany. ... The AirTouch Tower at One California Street in San Francisco, California AirTouch Communications was a wireless service provider that started in the mid-1990s and survived through late 1999 when it was absorbed by Verizon Communications business unit Verizon Wireless in one of the largest communications and even corporate mergers... Categories: Corporation stubs | Communications companies of the United States | Defunct companies | Telephone companies | Public Utilities ... General Telephone and Electronics (GTE) was the largest of the independent US telephone companies during the days of the Bell System. ... This article is about the energy corporation. ... The American Oil Company, or Amoco, was a global chemical and oil company, founded in Baltimore in 1910 and incorporated in 1922 by Louis Blaustein and his son Jacob, but now part of BP. The firms early innovations include the gasoline tanker truck and the drive-through filling station. ... Qwest Communications International Inc. ... U S West, Inc. ... MCI logo MCI, Inc. ... MCIs original corporate logo MCI Communications was an American telecommunications company that was instrumental in legal and regulatory changes that led to the breakup of the AT&T monopoly of American telephony. ...

Major M&A from 2000 to present

Top 9 M&A deals worldwide by value (in mil. USD) since 2000, unless where noted:[4]

Rank Year Purchaser Purchased Transaction value (in mil. USD)
1 2000 Hewlett-Packard

[7] The Hewlett-Packard Company (NYSE: HPQ), commonly known as HP, is a very large, global company headquartered in Palo Alto, California, United States. ...

Compaq 25,000
2 2000 Fusion: America Online Inc. (AOL)[8][9] Time Warner 164,747
3 2000 Glaxo Wellcome Plc. SmithKline Beecham Plc. 75,961
4 2004 Royal Dutch Petroleum Co. Shell Transport & Trading Co 74,559
5 2006 AT&T Inc.[10][11] BellSouth Corporation 72,671
6 2001 Comcast Corporation AT&T Broadband & Internet Svcs 72,041
7 2004 Sanofi-Synthelabo SA Aventis SA 60,243
8 2000 Spin-off: Nortel Networks Corporation 59,974
9 2002 Pfizer Inc. Pharmacia Corporation 59,515
10 2004 JP Morgan Chase & Co[12] Bank One Corp 58,761

Compaq Computer Corporation is an American personal computer company founded in 1982, and now a brand name of Hewlett-Packard. ... Time Warner Inc. ... GlaxoSmithKline (GSK) plc is a pharmaceutical and healthcare company, one of the largest in the world. ... GlaxoSmithKline (GSK) plc is a pharmaceutical and healthcare company, one of the largest in the world, in fact the second largest pharmaceutical company. ... This article is about the current AT&T. For the 1885-2005 company, see American Telephone & Telegraph. ... BellSouth Corporation was an American telecommunications holding company based in Atlanta, Georgia. ... This article is about the current AT&T. For the 1885-2005 company, see American Telephone & Telegraph. ... Pfizer Incorporated (NYSE: PFE) is a major pharmaceutical company, which ranks number one in the world in sales[2]. The company is based in New York City. ...

See also

A competition regulator is a government agency, typically a statutory authority, which regulates competition laws, and may sometimes also regulate consumer protection laws. ... Control premium is an amount that a buyer is usually willing to pay over the current market price of a company. ... Divestment (divestiture) is a term in finance and economics. ... International Financial Reporting Standards (IFRS) are standards and interpretations adopted by the International Accounting Standards Board (IASB). ... This is a list of some of the major banking company mergers since 1930 in the U.S. ^ SunTrust to buy National Commerce Financial. ... Control in one of the managerial functions like planning, organising, staffing and directing. ... Merger Control refers to the procedure of reviewing mergers and acquisitions under antitrust / competition law. ... Merger simulation is a commonly used technique when analyzing potential welfare costs and benefits of mergers between firms. ... ShakeOut is a milkshake outlet based in Derby in the United Kingdom. ... This article is about finance. ...

Major M&A organizations

M&A Source is a support organization to middle market business intermediaries that provides training and education for small to mid-size business mergers and acquisitions intermediaries. ... The International Business Brokers Association (IBBA) is the largest international non-profit association operating exclusively for people and firms engaged in business brokerage and mergers and acquisitions. ... A monthly newsletter that is one of the cornerstones of the academic world of mergers and acquisitions and of the education of business brokers. ... Corporate Finance Associates (CFA) is a Los Angeles based, independent investment banking firm with over 30 offices located in North America. ...

References

  1. ^ Lien, Kathy (2005-10-12). Mergers And Acquisitions - Another Tool For Traders. Investopedia. Retrieved on 2007-06-17.
  2. ^ Finklestein, Sydney. Cross Border Mergers and Acquisitions. Dartmouth College. Retrieved on 2007-08-09.
  3. ^ Platt, Gordon. Cross-Border Mergers Show Rising Trend As Global Economy Expands. findarticles.com. Retrieved on 2007-08-09.
  4. ^ Top Mergers & Acquisitions (M&A) Deals. Institute of Mergers, Acquisitions and Alliances (MANDA). Retrieved on 2007-06-17.
  5. ^ www.maadvisor.com
  • Straub, Thomas: Reasons for frequent failure in Mergers and Acquisitions - A comprehensive analysis, Deutscher Universitätsverlag, Wiesbaden 2007. ISBN 978-3835008441
Year 2005 (MMV) was a common year starting on Saturday (link displays full calendar) of the Gregorian calendar. ... is the 285th day of the year (286th in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) is the current year, a common year starting on Monday of the Gregorian calendar and the AD/CE era in the 21st century. ... is the 168th day of the year (169th in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) is the current year, a common year starting on Monday of the Gregorian calendar and the AD/CE era in the 21st century. ... is the 221st day of the year (222nd in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) is the current year, a common year starting on Monday of the Gregorian calendar and the AD/CE era in the 21st century. ... is the 221st day of the year (222nd in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) is the current year, a common year starting on Monday of the Gregorian calendar and the AD/CE era in the 21st century. ... is the 168th day of the year (169th in leap years) in the Gregorian calendar. ...

  Results from FactBites:
 
Mergers and Acquisitions: Definition (1562 words)
Unlike all mergers, all acquisitions involve one firm purchasing another - there is no exchange of stock or consolidation as a new company.
Another type of acquisition is a reverse merger, a deal that enables a private company to get publicly-listed in a relatively short time period.
Regardless of their category or structure, all mergers and acquisitions have one common goal: they are all meant to create synergy that makes the value of the combined companies greater than the sum of the two parts.
Mergers and acquisitions - Wikipedia, the free encyclopedia (2346 words)
Corporate mergers may be aimed at reducing market competition, cutting costs (for example, laying off employees), reducing taxes, removing management, "empire building" by the acquiring managers, or other purposes which may not be consistent with public policy or public welfare.
Beyond the intermediaries' high fees, the current process for mergers and acquisitions has the effect of causing private companies to initially sell their shares at a significant discount relative to what the same company might sell for were it already publicly traded.
A merger can resemble a takeover but result in a new company name (often combining the names of the original companies) and in new branding; in some cases, terming the combination a "merger" rather than an acquisition is done purely for political or marketing reasons.
  More results at FactBites »

 
 

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