Question

Briefly describe a corporate merger that you have read about recently or been part of as an employee. What kind of a merger was it? How well is it working from the perspectives of the various stockholders? As far as you are able to determine, what factors are contributing to the success or lack of it?

Answer 1

Corporate mergers and acquisitions have long received a lot of attention from the corporate world,the public as well as the academic world.

Merger is the combination of two or more companies in creation of a new entity or formation of holding company.

the defination of mergers are absorption merger and equal merger(1:1 type merger)

6 keys to merger success:

1.Strategic vision and fit

2.Deal structure

3.Due diligence

4.Pre-merger planning

5.Post-merger integration

6.External factors

Critical success factors of mergers:

1.Complete and clear objectives,goals and scope of the project

2.Client consultation and accpetance

3.Project managers competence and commitment

4.Team members competence and commitment

5.Communication and information sharing and exchange

6.Project plan development

7.Resource planning

8.Time management,tight secrecy

9.price evaluation and financing scheme

10.Risk management

Mergers objectives:

a.Selling company

b.Buying company

Type of Company:

a.Private company

b.Public company

Mergers is the 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.

Mergers can be defined as a type of restructuring in that they result in some entity reorganization with the aim to provide growth or positive value. Consolidation of an industry or sector occurs when widespread M&A activity concentrates the resources of many small companies into a few larger ones

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

The Merger process itself is a multifaceted which depends upon the type of merging companies.

• A horizontal merger is usually between two companies in the same business sector. The example of horizontal merger would be if a health care system buys another health care system. This means that synergy can obtained through many forms including such as; increased market share, cost savings and exploring new market opportunities.
• A vertical merger represents the buying of supplier of a business. In the same example as above if a health care system buys the ambulance services from their service suppliers is an example of vertical buying. The vertical buying is aimed at reducing overhead cost of operations and economy of scale.
• Conglomerate Mergers is the third form of Mergers process which deals the merger between two irrelevant companies. The example of conglomerate Mergers with relevance to above scenario would be if health care system buys a restaurant chain. The objective may be diversification of capital investment.

• An acquisition or takeover is the purchase of one business or company by another company or other business entity. Such purchase may be of 100%, or nearly 100%, of the assets or ownership equity of the acquired entity. Consolidation occurs when two companies combine to form a new enterprise altogether, and neither of the previous companies remains independently. Acquisitions are divided into "private" and "public" acquisitions, depending on whether the acquiree or merging company (also termed a target) is or is not listed on a public stock market. Some public companies rely on acquisitions as an important value creation strategy.An additional dimension or categorization consists of whether an acquisition is friendly or hostile.

  Achieving acquisition success has proven to be very difficult, while various studies have shown that 50% of acquisitions were unsuccessful. "Serial acquirers" appear to be more successful with M&A than companies who only make an acquisition occasionally The new forms of buy out created since the crisis are based on serial type acquisitions known as an ECO Buyout which is a co-community ownership buy out and the new generation buy outs of the MIBO (Management Involved or Management & Institution Buy Out) and MEIBO (Management & Employee Involved Buy Out).

  
  "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 and/or longer-established company and retain the name of the latter for the post-acquisition combined entity. This is known as a reverse takeover. Another type of acquisition is the reverse merger, a form of transaction that enables a private company to be publicly listed in a relatively short time frame. A reverse merger occurs when a privately held company (often one that has strong prospects and is eager to raise financing) buys a publicly listed shell company, usually one with no business and limited assets.Whether a purchase is perceived as being a "friendly" one or a "hostile" depends significantly on how the proposed acquisition is communicated to and perceived by the target company's board of directors, employees and shareholders. It is normal for Mergers deal communications to take place in a so-called "confidentiality bubble" wherein the flow of information is restricted pursuant to confidentiality agreements. In the case of a friendly transaction, the companies cooperate in negotiations; in the case of a hostile deal, the board and/or management of the target is unwilling to be bought or the target's board has no prior knowledge of the offer. Hostile acquisitions can, and often do, ultimately become "friendly", as the acquiror secures endorsement of the transaction from the board of the acquiree company. This usually requires an improvement in the termsof the offer and/or through negotiation.

  The combined evidence suggests that the shareholders of acquired firms realize significant positive "abnormal returns" while shareholders of the acquiring company are most likely to experience a negative wealth effect. The overall net effect of M&A transactions appears to be positive: almost all studies report positive returns for the investors in the combined buyer and target firms. This implies that M&A creates economic value, presumably by transferring assets to management teams that operate them more efficiently

  There are also a variety of structures used in securing control over the assets of a company, which have different tax and regulatory implications: