Mergers and Takeovers

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MERGERS AND TAKEOVERS maMerger is defined as combination of two or more companies into a single company Merger is also defined as amalgamation or fusion. A typical merger, involves two companies, which combine to become one legal entity with the goal of producing a company that is worth more than the sum of its parts. In a merger of two corporations, the shareholders usually have their shares in the old company exchanged for an equal number of shares in the merged entity Types of mergers a)vert
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  MERGERS AND TAKEOVERS maMerger is defined as combination of two or more companies into a single companyMerger is also defined as amalgamation or fusion.A typical merger, involves two companies, which combine to become one legal entitywith the goal of producing a company that is worth more than the sum of its parts. In amerger of two corporations, the shareholders usually have their shares in the old companyexchanged for an equal number of shares in the merged entity Types of mergersa)vertical mergers in vertical combinations, the merging undertaking would be either a supplier or a buyer using its product as intermediary material for final production b)horizontal mergers It is a merger of two competing firms which are at the same stage of industrial process. c)circular mergers Companies producing distinct products seek amalgamation to share commondistribution and research facilities to obtain economies d)conglomerate mergers It is amalgamation of two companies engaged in unrelated industries  For example, back in 1998, Chrysler Corp. merged with, Daimler Benz to formDaimlerChrysler.In 2007 Daimler Benz sold 80% of stake hold in Chrysler Group to Cerberus CapitalManagement.Big oil got even bigger in 1999, when Exxon and Mobil signed an agreement to mergeand form Exxon MobilDisney and Pixar The merger of legendary Walt Disney and everything-we-create-kids-adore Pixar was amatch made in cartoon heavenAOL and Time Warner At the height of the Internet craze, two media merged together to form what was seen as arevolutionary move to fuse the old with the new.In 2001, old-school media giant Time Warner consolidated with American Online(AOL), the Internet and email provider of the people. It was considered the combining of the best of both worlds: print and electronic, together at last.In 2005, another major communication merger occurred, this time between Sprint and Nextel CommunicationIn January 2009, Fiat and Chrysler LLC announced that they were going to form a globalalliance.  A takeover, or acquisition,is the purchase of one business or company by another company or other business entity.Takeovers are divided into private and public ,depending on whether the target company is listed on public stock markets. Achieving acquisition success has proven to be very difficult, while various studies haveshown that 50% of acquisitions were unsuccessful. Types of takeoversa)friendly takeovers Before a bidder makes an offer for another company, it usually first informs the company's board of directors. b)hostile takeover A hostile takeover allows a suitor to take over a target company whosemanagement is unwilling to agree to a takeover  c)reverse takeover Takeover 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 company and retainthe name of the latter for the post-acquisition combined entity. d)backflip takeovers A backflip takeover is any sort of takeover in which the acquiring company turns itself into asubsidiaryof the purchased company.  Pros and cons of takeoversPros: ã Increase in sales ã Profitability of target company ã Increase market share ã Decrease competition ã Reduction of overcapacity in the industry ã Enlarge brand portfolio ã Increase ineconomies of scale Cons: ã Reduced competition and choice for consumers in oligopoly    markets ã Cultural integration/conflict with new management ã Hidden liabilities of target entity. ã The monetary cost to the company. ã Lack of motivation for employees in the company being bought up. Example of takeovers: Apple has confirmed that it has acquired Anobit, an Israeli maker of flash storagetechnology.In 1999 Vodafone Group acquired Airtouch CommunicationsIn 2000 Tata Motors of India acquired Daewoo in 2004 and signed a deal with Fordwhich gave Tata control of both luxury makes Jaguar and Land Rover In November 2006 – Google Inc. closed its acquisition of YouTube.Romanian producer Bere Mures was bought by Dutch giant Heineken.American firm Advent purchased the Romanian drug manufacturer LaborMed.
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