Question

What are the most important factors you learned about M & As? What were the most challenging aspects of M & As projects? What were the most interesting aspects of M & As projects?

Answer 1

M&As refer to mergers & acquisitions. The most important factor of M&As is the purpose of the merger/acquisition; i.e whether the acquiring company wants to utilize the current operations of the target (operating merger) or whether it wants a stake in the target company which has operations which are quite different from the operations of the acquiring company (financial merger). When its an operating merger the post-merger company is worth more than the sum of the individual companies. Value of the merged company (A+B) = Value of company A + Value of company B + Synergy between the companies. The most challenging aspect is the financial due-diligence required for valuing the individual companies i.e company A needs to value itself as well as company B, to get a fair deal. The valuation is quite complicated as it could lead to legal, political, or social complications. Eg. Competition laws, strikes, breakouts. These instances should be taken into account. Calculating the synergy of the two merging companies is very subjective and arbitrary. M&A can help companies enter new markets without spending at the initial growth stage. Eg. The acquisition of Flipkart by Walmart has helped Walmart to enter the Indian e-commerce market without laying the foundation; it has given Flipkart global recognition. It is a win-win game unless Walmart has overpaid or Flipkart has sold itself short. The last two instances are debatable.