Question

Mergers and acquisitions (M&A)

1. What is merger and acquisition
2. Did Facebook Buy WhatsApp? What is the process of merge and acquisition??? mention important points.
3. How do interest rates affect M&A? How low-interest rates affect the M&A market? And the effect of rising interest rates on M&A activity in Canada

Answer 1

1.) The term mergers and acquisitions (M&A) refer broadly to the process of one company combining with one another. In an acquisition, one company purchases the other outright. The acquired firm does not change its legal name or structure but is now owned by the parent company.

2.) Yes facebook buy whatsapp.

process of merge and acquistion are following:-

• Develop an acquisition strategy – Developing a good acquisition strategy revolves around the acquirer having a clear idea of what they expect to gain from making the acquisition – what their business purpose is for acquiring the target company (e.g., expand product lines or gain access to new markets)
• Set the M&A search criteria – Determining the key criteria for identifying potential target companies (e.g., profit margins, geographic location, or customer base)
• Search for potential acquisition targets – The acquirer uses their identified search criteria to look for and then evaluate potential target companies
• Begin acquisition planning – The acquirer makes contact with one or more companies that meet its search criteria and appear to offer good value; the purpose of initial conversations is to get more information and to see how amenable to a merger or acquisition the target company is
• Perform valuation analysis – Assuming initial contact and conversations go well, the acquirer asks the target company to provide substantial information (current financials, etc.) that will enable the acquirer to further evaluate the target, both as a business on its own and as a suitable acquisition target
• Negotiations – After producing several valuation models of the target company, the acquirer should have sufficient information to enable it to construct a reasonable offer; Once the initial offer has been presented, the two companies can negotiate terms in more detail
• M&A due diligence – Due diligence is an exhaustive process that begins when the offer has been accepted; due diligence aims to confirm or correct the acquirer’s assessment of the value of the target company by conducting a detailed examination and analysis of every aspect of the target company’s operations – its financial metrics, assets and liabilities, customers, human resources, etc.
• Purchase and sale contract – Assuming due diligence is completed with no major problems or concerns arising, the next step forward is executing a final contract for sale; the parties make a final decision on the type of purchase agreement, whether it is to be an asset purchase or share purchase
• Financing strategy for the acquisition – The acquirer will, of course, have explored financing options for the deal earlier, but the details of financing typically come together after the purchase and sale agreement has been signed
• Closing and integration of the acquisition – The acquisition deal closes, and management teams of the target and acquirer work together on the process of merging the two firms

3.) The main impact of interest rates is the price that someone is willing to pay for companies. As interest rates go up, private equity sponsors will have to pay more for the loans underlying the acquisitions, and ultimately, will want to pay less their acquisition.

One of the main factors, affecting the market for mergers and acquisitions are the prevailing interest rates. Rising interest rates in a slowly growing economy, have a negative impact on the M&A market. This means that the speed at which interest rates rise or fall is a key factor affecting the M&A market. A slow but gradual rise in interest rates in a strong economy builds confidence among businesses and this results in increasing M&A activity. On the other hand, a sudden rise in interest rates in moderate economic conditions, creates instability in the market. This reduces M&A activity for some time.