Mergers and Aquisitions

Introduction

M&A are a big part of the corporate finance world.

Every day, Wall Street investment bankers arrange M&A transactions.

These actions often make the news.

Deals can be worth hundreds of millions, or even billions, of dollars. They can dictate the fortunes of the companies involved for years to come.

For a CEO, leading an M&A can represent the highlight of a whole career.

Definition

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 - "merger of equals."

An acquisition:

happens when one company takes over another and clearly established itself as the new owner.

Synergy –the premium for potential success

Buyers will need to pay a premium if they hope to acquire the company, regardless of what pre-merger valuation tells them.

for sellers, that premium represents their company's future prospects

for buyers, the premium represents part of the post-merger synergy they expect can be achieved.

The equation solves for the minimum required synergy:  

Varieties of mergers

Varieties of mergers

Varieties of mergers

Merger’s benefits

Criteria for successful mergers:

A reasonable purchase price

Cash transactions

Sensible appetite

Look for acquiring companies with a healthy grasp of reality.

Types of acquisitions

Acquisitions benefits

Methods of acquisitions

Doing the deal

Start with a tender offer.

State the overall price.

Advertising in business press about the tender offer, the overall price and the deadline.

Doing the deal

Closing the deal.

Why they can fail?

Why they can fail?

More glory seeking than business strategy;

Globalization; the generalized fear;

Companies are over focused on cutting costs, while revenues and profits suffer.

Too large;