mergers and acquisitions

Question 1

merger

Answer 1

bringing 2 companies to q equity

two businesses are ususally same size

Question 2

acquisition

Answer 2

one transaction - business A takes over business B copmletley

Business B dissolves and cease to exist

A absorbs company B assets and liabilities

Question 3

7 reasons why M&A may occur

Answer 3

gain access to copmany’s customers

gain access to other company’s distribution channels

acquire intellectual property, tech, propietors of tech or other assets

realise cost synergies

acquire talent

remove competitior from the market

diversify sources of revnue

Question 4

what does private equity firm do by investing

Answer 4

generate high return on I

diversify portfolio of companies to reduce risk

reasie synergies in other copmanies the frim owns

Question 5

what are the 5 steps in M&A

Answer 5

understand reason for the acwuisition

quantify specific goal /target (after understanding the primary reason)

create M/A framework and work through the case

consider risks or alternative acquisition targets

deliver recommendation and propose next steps

Question 6

1 - undestnd the reaon for acquisition

Answer 6

generate high return on I

copmany wanna acquire , intellectual property ,propriety tech or other assets

copmany wants to relaise rev/cost of synergies

Question 7

2 - quanitfy speicif goal /target

Answer 7

what e.g roi ar ehtey taretting and when

*sometimes the target is not quantifiable

Question 8

what is framework for mergers and acquisitions

Answer 8

market attractiveness

synergies

copmany attractiveness

financial implications

Question 9

what do we say for market attractiveness (of firm we targetting)

Answer 9

mkt size

mkt growth rate

avergae profit margins

how strong are substitiutes

how strong is supplier power

how strong is buyer power

how high are BTE

Question 10

Wht do we say for company attractivesnes

Answer 10

is company profitable

how quick is company growing

does company have copmetitive advantages

does company have significant differentiation from competitors

Question 11

synergies (rev synergies)

Answer 11

acessing new distribution channles

acessing new customer segments

bundling products togeter

upselling products

Question 12

cost synergies

Answer 12

consolidating redundant costs and ahving increased buyer power

Question 13

financial implications checklist

Answer 13

do expected finacial fains/return on I jsutify the acquisiiton price

• is acquisition price fair
• how long will it take to BE on acquisiiton price
• expected increase in annal rev
• expected cost savinfs
• projected ROI