MERGERS

Question 1

STEPS INVOLVED IN M AND A

Answer 1

1) ANALYSIS CLIENT’S REQUIREMENTS
2)GENERATING IDEAS
3)VALUING COMPANIES
4)IDENTIFYING POTENTIAL PARTNERS
5)DRAWING UP DOCUMENTATION
6)DUE DILIGENCE
7)SUPPORTING MANAGEMENT
8)CONDUCTING NEGOTIATIONS

Question 2

EXPLAIN THE GROWTH THROUGH MERGERS AND ACCQUISTIONS?

Answer 2

Mergers and accquisitions are a potential strategy to ensure accelerated growth of a business. There are various reasons for which a firm may choose to expand through mergers and accquistions instead of expanding internally. Accelerated growth process is ensured by accquiring a target in a line of business the bidding company seeks to enlarge into when compared with internal expansion, This is because the company already exists in its place with its own production capacity, Distribution network and clientele. this saves a lot of time and investement for the growing company. Growth through m and a may turn out to be less expensiev than internal expansion especially when the replacement cost of assets are higher than the market value of target assets

Question 3

how is a merger formed?

Answer 3

the mergers take place in a very consensual setting. The executives of the target company help those of the purchasers in a due diligence process to ensure the merger is beneficial to both firms. The board of directors of both parties agree to combine and seek stockholder approval. Usually atleast 50% of the shareholders of the target and bidding firms have to agree to the merger. The target company then ceases to exist and becomes a part of the accquired company

Question 4

WHAT ARE MERGERS?

Answer 4

a merger is a combination of two companies into one larger company. This action involves stock swap or cash payments to the target. In merger the accquiring company takes over the assets and liablities of the merged company. Both the combining companies are dissolved and only the new entity continues to operate. In general when the combination takes place between two companies of the similar size the term consolidation is applied. Whereas if the combination is taking place between two firms that differ significantly in size then the term absorption is used.tHUS MERgers take two forms. In the first form amalgamation, the combining enities form a new entity, extinguising both the existing entities. In the second form absorption, one entity is absorbed into the other. The latter doesnt lose its entity. Thus in any type of merger atleast one entity must lose its entity

Question 5

WHAT ARE ACCQUISITIONS?

Question 6

types of mergers

Answer 6

HORIZONTAL MERGER
VERTICAL MERGER
CONGLOMERATE MERGER
PRODUCT EXTERNSION MERGER
MARKET EXTENSION MERGER

Question 7

CONGLOMERATE MERGER

Answer 7

a merger occcuring between firms that are involved in totally different business activities. There are two types of conglomerate merges; pure and mixed,
Pure conglomerate mergers occur bewteen firms that have nothing in common whereas mixed conglomerate mergers take place between firms that are looking for product extension or market extensions.
Eg - a merger between a leading athletic shoe manufacturer and a soft drink company. The resulting company would face the same competition in the two markets as the individual firms before merging. An example of a conglomerate merger is the merger between walt disney company and american broadcasting company