...Summary of the article: Mergers & Acquisition (M&A) values for 2011 year were said to exceed a trillion dollars, an incremental percent increase over the previous years. Nearly seven out of 10 companies planned to make at least one acquisition in 2012, significantly higher than 2011. In the first six months of 2012, the number of corporate’ Mergers & Acquisitions deals jumped to nearly 5,900, up from about 5,100 in the first six months of 2011. However, the high rate of failure of Mergers & Acquisitions deals, coupled with a still-sputtering economy, has begun to weigh on corporate leaders, financial executives and boards of directors. Companies and their financial leaders should not forego acquisitions, but should forego handling them so poorly. The Boston Consulting Group examined organizations with sustained strategies of growth through acquisitions. Analyzing about 700 large U.S. public companies over a 10-year period, the study found that companies that focused on and made acquisitions achieved the highest shareholder returns, outperformed companies that solely focused on organic growth, created more value for shareholders and grew market share more quickly than their competitors. Like Cisco Systems Inc. has for many years pursued a strategy of growth through acquisition. The Boeing Co. and General Electric Co. are two other leading global companies that have prioritized acquisitions, business partnerships and other joint ventures...
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...loss of $1.3 bil. Question #2: Does the market think this offer is good for Kraft shareholders? Why? * Stock price goes up to above $90 * Kraft shareholders are much richer * Potential for --improved offer --a restructuring plan --an offer by another potential acquirer Question #3: What does the market think of the restructuring plan? Stock price goes up to $102 -+ market believes restructuring will not occur or is not worth $110 a share Would a restructured Kraft be worth much more than the old $60 per share- appears to be a well-run company More likely explanation: market believed that plan would result in a new or improved offer What are the potential economic gains from this acquisition? * Kraft management can be used to help run General Foods division of Kraft * If there are synergies, the market believes Philip Morris is overpaying -+ Kraft shareholders benefit by the synergy value plus some...
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...Strengths and Weaknesses of FV Acct vs Amortized Cost Acct -Mergers: Exchange of shares, often occur between companies of relatively equal size Acquisition: Purchase a controlling number of the target shares directly from the shareholders in exchange of cash/shares -M&A 1. Worldwide economy uncertainty • The availability of credit, the regulatory environment, government deficits, sovereign debt crisis, conflicts in the Middle East, oil prices, currency conflicts and governmental austerity 2.Trends: • Down-sizing and cost-cutting during the economic downturn----Stockpile cash • The sale of portfolio companies owned by private equity interests -Motives for M&A • Desire to profit from opportunities represented by attractive target valuation • Diversify risk - Reduce earnings volatility and increase value • Achieve operating synergies-economies of scale, pricing power, higher growth, new markets • Financial synergies- increase debt capacity, tax benefits, reduce cost of capital -M&A Pitfalls • Sellers benefit disproportionately • Acquirers fail to cover cost of capital, resulting in dilution of shareholders value; higher price Overoptimistic appraisal, overestimated synergies, overlooked problems, overbidding ACCT Standard for Business Combination 1. Purchase Method-True economic substance • Assumption: one entity acquired another for cash or combination of cash and securities • Recognition of acquired assets...
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...Mergers and Acquisitions Essay Bus 508 (Contemporary Business) Mergers and Acquisitions Essay It is pretty common now in days that companies are combining one another and buying each other out. In the last three years there have been hundreds of firms either merging with one another or acquisition other firms. Knowing the difference between merging and acquisition really help determine the best route for the company. Merging is two or more firms combine to form one company and acquitting is when one firm buys out another firm. Facebook is a perfect example of an acquisition when they purchased WhatsApp in February 19, 2014 for $19 Billion dollars. This paper will go into details on some of the circumstances that resulted in the acquisition, if there were any positive of negative effects because of the acquisition, did the organizational structure change after the acquisition, and was there any modification done by Human Resources. One February 19 of this year, CEO of Facebook, Mark Zuckerberg, made a deal with CEO of WhatsApp, Jan Koum, to buy out WhatsApp for $19 billion dollars. The payout was going to be $12 billion in stocks, $4 billion in cash, and $3 billion in restricted units. WhatsApp is an application that lets people around the world text message for free. Koum denotes in Business Insider that his mission for the app was to build a cool product used globally by everybody (Carlson, Feb. 19, 2014). WhatsApp had more than 450 million monthly...
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...Introduction Mergers and acquisition (M&A) varies from country to country. Some countries have laws regulating M&A while others don’t. M&A basically is a combination of two or more businesses into one new business. What defines the merger or acquisition is how the combination is brought about. Mergers are usually negotiated between parties before the combination occurs while acquisition does not necessarily have to go through negotiations between parties. Mergers and Acquisition can succeed or fail base on a number of factors. This paper will examine the concept of mergers and acquisition, why M&A fail and possible recommendations Input Businesses sometimes merge or acquire to improve on their competitiveness and to meet their strategic objectives. Mergers and acquisition can come about because of stiff competition in the market or to create economies of scale or to enter new markets, or to diversify or a combination of many factors as mentioned in this sentence. Sometimes the only reason an acquire may purchase a business is for speculative profits, in that the sole purpose is to purchase with the intention to split them into smaller pieces and selling them or parts thereof for a price which is much higher than the acquiring price. Mergers and acquisition can also come about because of management failures. This situation can come about because management was unable to move the company in a positive direction which would have maximize shareholders wealth. Some of...
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...mergers and acquisitions Introduction 1. Should the government regulate mergers and acquisitions more carefully? 2. Purpose of the Study 3. Scope of Study 4. Method and Procedures Analysis 1. Positive opinions 2. Negative opinions 3. Government action Summary, Conclusion, and Recommendation 1. Summary 2. Conclusion 3. Recommendation Government regulation over business mergers and acquisitions Prepared for Anne Joiner English Professor Central Washington University Prepared by Diep Chu July 18, 2012 To: Senator Joseph Smith From: Diep Chu Date: July 18, 2012 Subject: Government regulation over business mergers and acquisitions I submit the accompanying report, authorized by Anne Joiner, English Professor at Central Washington University, Des Moines, on the research of mergers and acquisitions in market. Available literature and government Web sites were examined in order to answer the question: Should the government regulate mergers and acquisitions more carefully? The report employed secondary research using electronic sources of scholarly articles, government publications, and companies’ articles through the Internet due to the research time and funding limitation. All research was conducted in mid-July, 2012. This research project has been a fantastic experience for me when I get to know more details about the popular issue currently happen in our business market, mergers and acquisitions. I would like...
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...Abstract This study focuses on to what extent support for mergers and acquisitions has an impact on organizational change over time. This support will be seen as the degree of motivation, acceptance and knowledge that employees have at the beginning of the M&A. The data used in this study was gathered from two companies operating in the IT- sector. 527 returned questionnaires were analyzed. The results shows that the culture perception changed in time and depends on the perception they had at the beginning of the M&A. Motivation did had an impact on the change. The degree of Acceptance and Knowledge of the employees had no influence on this change. Interaction effects of the support variables on the change in perception over time were also investigated. These findings tell that the perception of organizational culture at the beginning of the M&A plays an important role for the culture perception after the M&A. The more employees are motivated, the more employees are willing to change. Also the longer employees work at the organization, the more they are willing to change. Managers should take this into account for the implementation of the change. 3 Organizational Culture Samenvatting Deze studie richt zich op in hoeverre steun voor fusies en overnames ( F&O) een invloed heeft op de organisatorische veranderingen na verloop van tijd. Steun wordt in deze studie gezien als de mate van motivatie, acceptatie en kennis die medewerkers hebben aan...
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...Why do mergers and acquisition often lead to the consolidation of positions and reductions in work force? When two companies merge the reason usually is to improve the combined profile of both entities or to increase the company stock. When two companies in the same competitive industry merge it is like putting together two incomplete car collections. There may be cars in one collection that are not in the other collection. So you dispose of the cars that are duplicated and you end up with one full collection. A lot of times when two companies merge or there is an acquisition, there is a redundancy in workers. Therefore, the company gains new expertise to bring into the business because of that the may end up with some doubles. Also the company has to make cuts to the work force so that there are not double people completing the same job. If you have duplication of skills then you may need to remove that duplication, and it could be that the person who comes in via the merger is more skilled than the person you already have. It happens often. This is also a way of reducing costs and making both companies more profitable. Employee may be more affected by a merger then an acquisition because acquisition requires less of a change in wholesale. When the company merges then every employee is affected on each level. Many will become stressed and demotivated because of the fear of losing his or her job. The employees that make it through a merger with his or her position in place...
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...Mergers and Acquisitions Carrie Steptoe Contemporary Business/508 May 18, 2014 Facebook is one the of the nations’ leading social network sites in the United States, accumulating over one billion members since its creation back in 2004. So it really wasn’t a surprise to learn that Facebook had interest in acquiring Instagram, In April of 2012, Facebook acquired Instagram for one billion dollars, for their photo sharing mobile app. Instagram is a social network site that is an online photo and video sharing and network service that enables its users to take pictures and videos, put on digital filter to them, and share them on a variety of social networking services, like Facebook. The merge between Facebook and Instagram is considered one of the largest merging tech deals to date. Some would say it was a good move for Facebook to merge with the up and coming social networking sites, because it would increase users along as keeping their loyal users, by providing new features that Instagram offers. Others observing may say Facebook acquiring Instagram was clearly a defensive move, made in order for Facebook to keep its leading spot in social media network sites, and would probably say the merge is a bad business move because of its hastiness of spending one billion dollars for a startup company with no revenue at the time. However, the two companies merging was a historical moment in business history. One reason I feel Facebook decided to acquire Instagram, is because they...
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...Managing the strategic Dynamics of Acquisition Integration: Lessons from HP and Compaq Suggala Indraneel 012513187 Aim of the paper: This article discusses about the Hewlett Packard company and Compaq merger and analyzing the final result of the acquisition of the companies. The aim of the paper is to examine the operational integration process, process of formulating the integration logic, and strategic integration processes of two large high technology companies, HP and Compaq, which are well established in a highly dynamic competitive environment. Introduction: In 2001, HP CEO proposed to acquire the high technology computing company Compaq. They expected to have a longer term revenue and profit goals after merging the companies as both of the companies are already grown computing companies. But many of the analysts were against this idea. Even HP board members showed opposition towards the merger leading to a proxy fight. They argued that the integration risk was eventual as there was never a success in big companies acquisition the two companies have their own way of strategies and plans for the development of organization. This varied cultures create integration difficulties, revenue risks offset cost synergies, financial risks etc. This way, proxy fight was severe and success seemed narrow. But finally the organization integration was successful with...
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...C corporations 1. Outright purchase of Smithon stock a) Should Mr. Jones purchase the stock of Smithon outright leaving Smithon intact? No, Mr. Jones should not buy the stock. A stock purchase would result in Mr. Jones acquiring the assets, liabilities and also would inherit the contractual obligations of the selling corporation. In other words, Mr. Jones has bought the existing Smithon Corporation and he is responsible of ensuring daily operations run efficiently but the tax aspect of acquisition he is responsible for existing and any future tax liabilities that the selling corporation had. I would not advise Mr. Jones to buy the stock because he will be liable for any current and future tax obligations that the selling organization had before sale. Also purchase of stock is not favorable to Mr. Jones since the tax identity of Smithon corporation does not cease not exist. The tax schedule or basis of the selling organization will not change and the tax aspects will also remain the same. The methodology and tax year will not change meaning that Mr. Jones cannot change the financial period to end in December 31. Failure to change legal entity is not advantageous to the buyer because he is limited to adhering to the current tax basis on Smithon's assets even if he had paid more for the assets. Issuing debt in Johnson Services Company to pay for the Smithon Company would raise debt equity ratio issues. Issuing debt would increase the amount of liabilities owed by...
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...The supermarket was established in 1899 by William Morrison. In 1962, he purchased the Victoria Supermarket out of town. The growth of Morrison went steadily to increase their stores from 45 in 1990 to 81 in 1996 located in towns that close to main roads. It has been regarded as a leader in Sale-Based Ordering (SBO). Customers consider Morison chains as price competitive. Morrison is considered as the pioneer in feature of Market Street 2. Tesco It is classified as the market leader in grocery retailing that reached 545 outlets by 1996 guided by formula ‘pile it high, sell it cheap’. Tesco had two SBO systems, one for fresh food and the other for longer life products. 3. J Sainsbury The growth of J Sainsbury was through acquisition or joint venture. The major weakness on Sainsbury strategy was its slow response to changing market condition 4. Safeway The Safeway stores was established in 1977. The turnover of the Safeway during the period 1991 to 1996 was only...
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...the reason why they are need with a market economy. I will discuss the rationale for the intervention of government in the market process within the United States. How will the industry faces some threats and how they decide to handle it. I will discuss why mergers face threats and describe the additional complexities that would arise under different circumstances. I will analyze how different forces will come together to create a convergence between interest of stockholders and managers. Also explain the difference between shareholders and managers as principals and agent and last but not least; how do we create increased value for shareholders. In conclusion of this report I will decide on whether or not I would merge my company or not. If I decide to merge I will name the company and the reasons why. Explain why government regulation is needed, citing the major reasons for government involvement in a market economy There was no intention for the government to have a hand in business. The government wanted businesses to act on their own best interests without any involvement from the government. The basic role of government in business would be just to referee only. The following roles of government are: protecting business property and enforcing business contracts, setting and collecting taxes. The government would provide fire, police and military protection under protecting business property. The government would issue trademarks to businesses...
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...Commercial & Transport Law Lecturer: Niall Kearney Student: Graeme Leahy Explain why the European Commission regulates mergers between undertakings (Regulation 139/2004) First of all, what is the Merger Control Regulation (MCR)? Merger Control is the procedure of reviewing mergers and acquisitions under competition law. The MCR was put into force on 21 September 1990, providing procedures for commission notifications and investigations. These regimes are adopted to prevent anti-competitive consequences of mergers and acquisitions. Most merger control regimes normally provide accordingly for one of the following: * Does the concentration significantly impede effective competition? * Does the concentration substantially lessen competition? * Does the concentration lead to the creation or strengthening of a dominant position? The purpose of the MCR is to enable competition authorities to regulate changes in market structure by deciding whether two or more commercial companies may merge, combine or consolidate their business to one. It might be expected that many mergers would be forbidden as they may raise severe competition concerns. In particular, they may result in the undertakings acquiring or strengthening a position of market power and in an increase in the market price of the products or services on the respected market. (Anton, n.d.). However, mergers also give the owner of the business the opportunity to sell it on. If this wasn’t a possible...
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...Mergers and acquisitions (M&A) are both aspects of strategic management, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture. Methods to pursue a strategy can be divided into three categories: internal growth, external growth (mergers, acquisitions, disposals) and collaboration (alliances and partnerships). Of course, these conditions can also affect other policies, such as the consolidation of a competitive position or the establishment of an advantage through economies of scale. In this task, we will focus on mergers and acquisitions. 1) Definitions: An acquisition corresponds to the repurchase of an organization by another organization, while a merger is the decision mutually granted by organizations to share their ownership. Most of the acquisitions are friendly: both parts get on the terms of the repurchase, and the direction of the target recommends to his(her) shareholders to accept the offer. However, certain acquisitions are hostile: the buyer proposes then a price to the shareholders of the target against the advice of his managers. The choice of the shareholders is then decisive. The direction(management) of Cadbury so initially rejected the hostile offer of Kraft by looking for a more friendly...
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