Mergers and Acquisitions Research Paper
Table of Contents
I. INTRODUCTION 1
II. MERGERS & ACQUISITIONS DEFINED 1
III. WHY M&A? 1
A. PERFORMANCE 1
B. MARKET FACTORS 2
C. METHODS 2
IV. ISSUES 2
A. CULTURE AND EMPLOYEES 3
B. LEADERSHIP 3
C. CUSTOMERS 3
D. VEBLEN AND GOODWILL 4
V. MAKING M&A SUCCESSFUL 4
A. COMPANY TYPE 4
B. IDENTIFICATION OF OPPORTUNITIES 5
C. SPEED OF INTEGRATION 5
D. CUSTOMERS 6
E. COMMUNICATION AND CULTURE 6
VI. CONCLUSIONS 6
VII. OBSERVATIONS 8
REFERENCES 9 I. Introduction
This paper presents the issues with mergers and acquisitions and discusses the methods to make M&As more successful in an attempt to determine if they are helpful or harmful to the companies, their shareholders, and the economy as a whole.
II. Mergers & Acquisitions Defined
Acquisitions are the absorption of a smaller firm by a larger firm, while a merger is the combination of two firms to form a single entity. In a merger, there is often an exchange of stock between the companies where one company issues shares to the shareholders of the other company at a certain ratio. The firm whose shares continue to exist is generally referred to as the acquiring firm while the other is the target firm.
Except for synergies, the post-merger value of the two firms is equal to the pre-merger value. The target firm's shareholders, however, often benefit because they are paid a premium for their shares. Synergies are revenue enhancements and cost savings gained through the merger/acquisition.
To measure the success of a merger/acquisition, one must determine if the value of the acquiring firm is enhanced by it.
III. Why M&A?
Firms conduct mergers and acquisitions for a variety of reasons. There are performance factors, market factors, and agency (management) factors. Mergers also occur in a variety of ways; from pre-planned executions to last-minute opportunities.
A. Performance
Mergers are often undertaken to improve some measure of performance. These can include cost savings opportunities,
I. INTRODUCTION 1
II. MERGERS & ACQUISITIONS DEFINED 1
III. WHY M&A? 1
A. PERFORMANCE 1
B. MARKET FACTORS 2
C. METHODS 2
IV. ISSUES 2
A. CULTURE AND EMPLOYEES 3
B. LEADERSHIP 3
C. CUSTOMERS 3
D. VEBLEN AND GOODWILL 4
V. MAKING M&A SUCCESSFUL 4
A. COMPANY TYPE 4
B. IDENTIFICATION OF OPPORTUNITIES 5
C. SPEED OF INTEGRATION 5
D. CUSTOMERS 6
E. COMMUNICATION AND CULTURE 6
VI. CONCLUSIONS 6
VII. OBSERVATIONS 8
REFERENCES 9 I. Introduction
This paper presents the issues with mergers and acquisitions and discusses the methods to make M&As more successful in an attempt to determine if they are helpful or harmful to the companies, their shareholders, and the economy as a whole.
II. Mergers & Acquisitions Defined
Acquisitions are the absorption of a smaller firm by a larger firm, while a merger is the combination of two firms to form a single entity. In a merger, there is often an exchange of stock between the companies where one company issues shares to the shareholders of the other company at a certain ratio. The firm whose shares continue to exist is generally referred to as the acquiring firm while the other is the target firm.
Except for synergies, the post-merger value of the two firms is equal to the pre-merger value. The target firm's shareholders, however, often benefit because they are paid a premium for their shares. Synergies are revenue enhancements and cost savings gained through the merger/acquisition.
To measure the success of a merger/acquisition, one must determine if the value of the acquiring firm is enhanced by it.
III. Why M&A?
Firms conduct mergers and acquisitions for a variety of reasons. There are performance factors, market factors, and agency (management) factors. Mergers also occur in a variety of ways; from pre-planned executions to last-minute opportunities.
A. Performance
Mergers are often undertaken to improve some measure of performance. These can include cost savings opportunities,
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