Presentation on Merger

and acquisition

Presented by Vandana 843

MERGER
Definition: 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. This kind of action is more precisely referred to as a "merger of equals." Both companies' stocks are surrendered and new company stock is issued in its place.
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From the perspective of business structures:

Horizontal merger - Two companies that are in direct

competition and share the same product lines and markets. For example, combining of two book publishers or two luggage manufacturing companies to gain dominant market share Vertical merger - It is a combination of two or more firms involved in different stages of production or distribution of the same product. For example, joining of a TV manufacturing(assembling) company and a TV marketing company or joining of a spinning company and a weaving company.
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 Market-extension merger - Two companies that sell

the same products in different markets. Product-extension merger - Two companies selling different but related products in the same market. Conglomeration - Two companies that have no common business areas For example, merging of different businesses like manufacturing of cement products, fertilizer products, electronic products, insurance investment and advertising agencies. L&T and Voltas Ltd are examples of such mergers.

From the perspective of finance:

Purchase Mergers: This kind of merger occurs when one

company purchases another. Consolidation Mergers: With this merger, a brand new company is formed and both companies are bought and combined under the new entity.

Definition: When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded.
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MERGERS
In the case of a merger, two firms

ACQUISITIONS
However, with acquisition, one

together form a new company. After the merger, the separately owned companies become jointly owned and obtain a new single identity.

firm takes over another and establishes its power as the single owner.
The

Mergers take place between two companies of more or less same size. In these cases, the process is called Merger of Equals. both are surrendered and new stocks in the name of new company are issued.

relatively less powerful, smaller firm loses its existence, and the firm taking over, runs the whole business with its own identity. Unlike the merger, stocks of the acquired firm are not surrendered, but bought by the public prior to the acquisition, and continue to be traded in the stock market.

When two firms merge, stocks of

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 Impact Of Mergers And Acquisitions on workers or

employees Impact of mergers and acquisitions on top level management Impact Of Mergers And Acquisitions on shareholders a) Shareholders of the acquired firm: b) Shareholders of the acquiring firm:

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 Mergers and Acquisition are intended to:

Limit competition. Synergy Utilise under-utilised market power. Overcome the problem of slow growth and profitability in ones own industry. Achieve diversification. Gain economies of scale and increase income with proportionately less investment. Establish a transnational bridgehead without excessive start-up costs to gain access to a foreign market.

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 The most common advantages of M&A are:

Accelerated Growth
Enhanced Profitability Economies of scale Operating economies Synergy Diversification of Risk Increased Market Power

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