Question

A. Chapter 11. Structure the Deal. Payment and Legal Considerations. In addition to the price one pays for an acquisition, just as important is the form or type of payment, but it is a little more involved than one might think. There are legal, accounting and tax consequences. Sometimes this depends on the form of acquisition like merger of equals. Briefly discuss what you think is essential into pricing of a deal and the form of payment as well as the form of acquisition used and why. Also, give real example . Be creative by bringing any other examples as well as current events. Also, write like 300 -400 words.

Answer 1

The merger and acquisition is a deal or an agreement between parties mutually agreeing with terms and conditions, to consolidate two business entities to become one for more economic benefits.

For the pricing of deal there are different essentials is to be considered; prioritizing the objective is the main step. The companies should understand each other firstly.

1) Initiating negotiation, parties negotiate each other and finding, deciding their main purpose of merger and acquisition.

2) Analysis of risk, the negotiating parties are analyse their risk involved in the merger and acquisition process.

3) Analysis of benefits, the parties should identify their benefits from the merger and acuisition.

The other main factors should be considered are; nature of business, future business plan, market conditions, accounting policies, financial strength, investments, corporate internal governance etc.   

The main form of payments used under merger and acquisition are: cash payment is the simplest and most common type of payment, sometimes shares, debentures, are used for the payment purpose.

Major types of acquisitions are; A) Hostile Takeover/ Acquisition is a type of acquisition, when one company takeover another company without any agreement of its board of directors.

Reasons; acquring company expecting target company can generate more income in the future.

B) Friendly Takeover/ Acquisitions is another type, one company taking over another company with both board of directors approving the process.

Reason; To gain competitiveness in a short time in the market, instant growth, expansion of market shares, to increase profitability etc.

Other modes of acqusitions are ; Horizontal Acquisition - two company with similar product and services.

Vertical Acquisitions- companies joins same industry, example; supply chain

Conglomerate Acquisition- two companies from different industries.

Concentric Acquisitions- companies have same customers with different product and services.

For better understanding best examples from the real world ;

1) Worldpay acquired by FIS at $35 billion: Is a best example of friendly acquisitions in the field of payment tech industries.

2) Ultimate Softwares announced the completion of its acquisition by an investors group - Hellman & Friedman (H&F), it will lead to increased ability to make long term investment decisions, benefited to its customers. companies share capital will be huge to produce enough return to its investors also.