mergers and takeovers

Question 1

define a merger

Answer 1

• when 2 businesses have agreed to join forces to make a new company
• negotiated but is desirable to both parties

Question 2

define a takeover

Answer 2

• involves one business acquiring control of another business

Question 3

there are 2 types of takeovers, friendly and hostile

what does this mean

Answer 3

friendly = struggling business is rescued

hostile = if another business gets over 50% shares they can takeover management and control

Question 4

when is a takeover preffered

Answer 4

• business lacks the knowledge to grow organically
• speed of growth is a high priority

Question 5

what are the common reasons why takeovers fail?

Answer 5

• process paid for takeover is too high
• lack of decisive management
• takeover was mishandled
• poor communication
• competitors take the opportunity to gain market share while the takeover is being integrated

Question 6

reasons for mergers/takeovers

Answer 6

• secure better distribution
• increase market share
• improved brand
• spread risk by diversifying
• eliminate competition
• access to technology/staff/skills