Boeing and Mcdonnell Douglas Merger

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Boeing and Airbus; two longtime rivals fighting over market share in an extremely volatile market due to high research and development costs and constant changes in market demand was the cause for Boeing to take drastic protective measures. Boeing which at the time was one of the largest commercial aircraft manufacturer and third largest aerospace defense contractor decided to merge with McDonnell Douglas. McDonnell Douglas also produces commercial aircraft but held much less of the market share than Boeing. The intent of this paper is to describe the search and screening process Boeing used which is broken down in to three categories: legal, financial and operational, discuss the valuation criteria, analyze the negotiation and bidding process and determine what kind of financing Boeing used to secure McDonnell Douglas. Legal Issues

When Boeing announced they were planning on purchasing rival McDonnell Douglas, this sparked a great deal of concern not only with the Federal Trade Commission but with anti-trust authorities in Europe as well. “The belief was that by reducing the markets to only two players, such a merger would so reduce the competition that consumers would be forced to pay more for airline tickets and tax payers would be forced to pay more for jet fighters and space vehicles” (http://www.washingtonpost.com/wp-srv/business/longterm/boeing/boeingtoo.htm). The goal addressing these concerns was to prevent Boeing and McDonnell Douglas from creating a monopoly of the aircraft and aerospace market. A monopoly is a situation in which a single company owns all or nearly all of the market for a given product or service (“Monopoly”, 2012). The concern in Europe was due to Boeing’s Practice of negotiating exclusive supply deals with major airlines such as Delta Airlines, American Airlines and Continental Airlines that prohibited purchases of Airbus planes ("European Union Objects To Just About Everything In Boeing-Mcdonnell Merger", 1997). In the...
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