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Mergers and Acquisitions

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Two companies together are more valuable than two separate companies – that's the reasoning behind Mergers & Acquisition. The terms merger and acquisition are used as though they were synonymous yet they are not. Acquisition implies a purchase whereby the buyer swallows another company and establishes himself as the new owner. A merger on the other hand happens when two firms unite into a single company. However, actual mergers don't take place as is always the case that the company that buys another (which are supposedly equal in strength) will proclaim that the action is a merger when in reality and technically an acquisition. A purchase deal will be also called a merger when both CEOs mutually agree that merging is in the best interest of their companies. But when the deal in unfriendly it is always regarded as an acquisition. (, 2007)




Based on the relationship between the two companies that are merging, we can classify mergers into:


Horizontal merger- When two companies merge that are in direct competition and share the same product lines and market.


Vertical merger- A customer and company or a supplier and company. E.g., a leather supplier and a shoemaker.


Conglomeration- Two companies that have no common business areas.


Based on how the merger is financed we can classify mergers into:


Purchase mergers- This kind of merger occurs when one company purchases another. The purchase is made with cash or through the issue of some kind of debt instrument.


Consolidation mergers-When both the companies are bought and combined to form a brand new company, the merger is known as consolidation merger. (




Acquisitions are slightly different from mergers in the sense that there is no exchange of stock or consolidation as a new company. Acquisitions are often congenial and all parties feel satisfied with the deal. Another type of acquisition is a reverse merger , it occurs when a private company that has strong prospects and is eager to raise financing buys a publically-listed company, usually one with no business and limited assets.


It must be understood that the main aim and purpose of all mergers and acquisition is to create and make the value of the combined companies greater than the sum of the two parts. (, 2007)


Is the deal worth it?


It is not an easy task for the investor to know when a deal is worthwhile. To find mergers that have a chance of success, investors should start by looking for a target, once a target has been identified the acquisition process includes

         Approaching targets

         Managing discussions with the vendors and their advisers

         Negotiating purchase terms

         Raising the most appropriate sources of finance to fund the acquisition

         Project managing the transaction through to completion


Will it work or won't it?


Mergers can fail for many reasons including a lack of management foresight, the inability to overcome practical challenges and loss of revenue momentum from a neglect of day-to-day operations. Mergers and acquisition come in all shapes and sizes, and investors need to consider the complex issues involved. (



References:, "Mergers and Acquisitions"

Available from: investment_banking_and_brokerage/ mergers_and_acquisitions_manda/reference/

C/HR/211. Master's Dissertation. Human Side of Mergers and Acquisitions: Case study of Social Security Bank Limited (SSB) and National Savings and Credit Bank (NSCB) in Ghana

C/B/772. Daimler and Chrysler: analysis of the merger

S/B/278. Mergers: successes and failures

C/B/653. Mergers & Acquisitions in banking industry USA and Europe

E/B/255. Case Study of DaimlerChrysler: lessons in post-merger integration

S/B/248. Globalisation strategy of Singtel, Optus

S/B/204. Corporate Environment: takeover of Telefonica by O2

S/B/190. Dubai Ports World acquisition of the Peninsular and Oriental Steam Navigation Company: an analysis of the CFIUS decision and lost potential benefits of the Foreign Direct Investment into the United States.

S/B/280. Mergers and Acquisitions of Maersk Group

E/B/262. Report on GlaxoSmithKline merger

E/B/233. Vodafone AirTouch's Bid for Mannesmann

C/B/500. Master's Dissertation. The motives, benefits and future performance of Disney after the acquisition of Pixar

C/B/498. Master's Dissertation. Acquisition of NatWest by Royal Bank of Scotland

E/B/216. Dissertation. The Effects of Mergers and Acquisitions on the Automotive Industry

E/B/168. With reference to the alternative reasons for mergers and acquisitions, outline and evaluate the motives for Daimler-Benz and Chrysler in their 1998 merger, in the context of the changing world automobile industry. Now, five years after the merger, was it a success? Recommend a future strategy for DaimlerChrysler.

C/B/286. Adidas/Reebok Merger

E/B/141. Forms of integration: mergers and acquisitions

S/B/139. Dissertation. Acquisition of Safeway: Where did Morrisons go wrong?

P/B/862. Telecommunications industry and NTL/Telewest merger

P/B/848. HRM during merger: problems and recommendations

P/B/840. GlaxoSmithKline (GSK) mergers and pharmaceutical industry

P/B/835. Merger and organizational change: theory and case study of AOL and Time Warner

C/B/439. Strategic Alliances vs. Mergers & Acquisitions

C/B/431. Powerelectric & Electrocar: The human side of merger

P/B/765. Merger of Brownloaf MacTaggart (BM) and Watkins International: problems analysis

P/B/740. Merger of GlaxoSmithKline

P/B/650. Report on Amstrad, mergers and acquisitions

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