Q2 L1: merger, acquisition, and takeover (INCLUDED) Flashcards
May or may not be a mutual agreement
Acquisition
The target (aka the small) company will be a part of the large company OR will dissolve OR will operate under a new name
Acquisition
Occurs when a buyer acquires all or part of assets or business of a selling entity, and where both parties are actively assisting in the purchase transaction.
Acquisition
When one company takes over another and clearly established itself as the new owner, the purchase is called an?
Acquisition
give examples of Acquisitions
2000
- America Online Inc. (AOL) — Time Warner
- Glaxo Wellcome Plc. — SmithKline Beecham Plc.
- Spin-off: Nortel Networks Corporation
2001
- Comcast Corporation — AT&T Broadband & Internet Svcs
2002
- Pfizer Inc. — Pharmacia Corporation
2004
- Royal Dutch Petroleum Co. — Shell Transport & Trading Co.
- Sanofi-Synthelabo SA — Aventis SA
- JP Morgan Chase & Co — Bank One Corp
2006
- AT&T Inc. — BellSouth Corporation
Both have mutual agreement
Merger
Equal companies “join forces” to create a new entity/product/services or to expand their market share
(Same scale business)
Merger
The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.
Merger
in corporate law, it is the joining together of two corporations in which one corporation transfer all its assets to the other, which continues to exist. In effect, one corporation “swallows” the other, but the shareholders of the swallowed company receive shares of the surviving corporation.
Merger
is a transaction that result in the transfer of ownership and control of a corporation.
Merger
When one company purchases another company of an approximately similar size. The two companies come together to become one.
Merger
Two companies usually agree to do this when they feel that they can do something together that they can not do on their own.
Merge
Merger combines two or more companies, generally by?
offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.
what is merger in corporate law?
it is the joining together of two corporations in which one corporation transfer all its assets to the other, which continues to exist. In effect, one corporation “swallows” the other, but the shareholders of the swallowed company receive shares of the surviving corporation.
merger is a transaction that result in the transfer of?
ownership and control of a corporation.
Mostly walang mutual agreement
Takeovers
A corporate action where an acquiring company makes a bid for an acquiree.
Takeovers
two types of takeovers?
- Hostile Takeover
- Friendly Takeover
A takeover attempt that is strongly resisted by the target firm. Walang mutual agreement ung takeover (sapilitan/threatening/blackmail/against the will of the acquiree)
Hostile Takeover
(Takeovers) If the target company is publicly traded, what happens?
the acquiring company will make an offer for the outstanding shares.
Target company’s management and board of directors agree to a merger or acquisition by another company. Both parties agree (mutual agreement)
Friendly Takeover
enumerate the types of merger
(7) (HVCCSSC)
1. Horizontal Merger
2. Vertical Merger
3. Conglomerate Merger
4. Concentric Merger
5. Statutory
6. Subsidiary
7. Consolidation
Two companies belong to the same industry
- Horizontal Merger
what is the relationship of companies in horizontal mergers?
They are technically competitors
The companies have businesses in the same space and are generally competitors to each other.
- Horizontal Merger
is a feature of an industry which consists of a large number of small firms or fragmented industry.
- Horizontal Merger
A merger occurring between companies producing similar products, goods and offerings similar services.
- Horizontal Merger
This type of merger occurs frequently as a result of larger companies attempting to create more effective economies of scale.
- Horizontal Merger
give examples of horizontal mergers
Example:
- Boeing and McDonnell Douglas
- Landbank(large/surviving company) and Ucpb(target company),
- URC and Century Pacific foods,
- Facebook and Instagram(Meta bought Instagram)
- Lipton India and Brooke Bond.,
- Bank of Mathura with ICICI Bank.
- BSES Ltd with Orissa Power Supply Company.
- Associated Cement Companies Ltd Damodar Cement.
what is the relationship of companies in vertical mergers?
buyer and seller relationship (potentially or actually)
is a merger between companies that produce different goods or offer different services for one common finished product.
- Vertical Merger
The companies operate at different levels in the supply chain of the same industry.
- Vertical Merger
what are the motivations behind vertical mergers?
(COIM)
The motivation behind such mergers is:
- cost efficiency,
- operational efficiency,
- Increased margins, and
- more control over the production or the distribution process.
The merger of the firm that have actual or potential buyer-seller relationship.
- Vertical Merger
give examples of vertical mergers
Example:
- [ung car manufacturer company purchases a tire company,]
- Time Warner Incorporated (a major cable operation) and the Turner Corporation (which produces CNN, TBS, and other programming)
- Pixar Animation Studio and Walt Disney
what is the relationship of companies in conglomerate mergers?
no relationship
A merger between companies that operate in completely different and unrelated industries.
A merge between firms that are involved in totally interrelated business activity.
- Conglomerate Merger
A pure conglomerate merger is between companies with totally nothing in common.
- Conglomerate Merger
They do this with different industries because they want to monopolize all the possible goods/services/industries to increase power and market shares (like sm kasi ang dami nyang eme eme)
- Conglomerate Merger
give examples of conglomerate mergers
Example:
- SM investment corporation (merchandising, retail, financial services, food(sm bonus), clothing line, real estate, etc) and 2go logistics
- Walt Disney Company and the American Broadcasting Company
- PepsiCo and Pizza Hut
- Proctor & Gamble-Clorox
what are the two types of conglomerate merger?
- Pure conglomerate merger
- Mixed conglomerate merger
It involves firms with nothing common. Merger is between companies with totally nothing in common.
- Pure conglomerate merger
It involves firms that are looking for product extensions or market extensions. Is between companies looking for market or product extensions.
- Mixed conglomerate merger
Examples:
- [Procter & Gamble Corporation (Pantene, Pringles, Whisper, Always, Pampers, lams, Head & Shoulders and Bounty) extended its line of products in 2004 by merging with Clorox Company, a producer of household-cleaning products and bleach.
Conglomerate mergers are typically undertaken to?
reduce business risks.
what is the relationship of companies in concentric mergers?
Same line of business pero no mutual relationship
A merger of firms which are into similar type of business.
- Concentric Merger
A concentric merger, often called a?
congeneric merger,
Is the merging of firms that operate in the same industry but do not have a mutual relationship (such as a buyer-seller relationship).
- Concentric Merger
give examples of concentric mergers
Example:
- Citigroup’s acquisition of Travelers Insurance. (While both were in the financial services industry, they had different product lines.)
- when an airline acquires a tourism industry-related business or if a newspaper merges with a TV channel.
- IF nag merge ung samsung with netflix,
Only one company continues to exist and the other dissolves
- Statutory Merger
is one in which all the assets and liabilities of the smaller company is acquired by the bigger (acquiring) company. As a result, the smaller target company loses its existence as a separate entity.
- Statutory Merger
give examples of statutory mergers
Example:
- Bank of Florida(surviving company) and Bank of Lubao(na dissolve)
The smaller company will become part of or a subsidiary of the bigger company
- Subsidiary Merger
is one in which the target company becomes a subsidiary of the bigger acquiring company. This happens because the target company may have a known brand or a strong image which would make sense for the acquiring company to retain.
Company A + Company B = (Company A + Company B)
- Subsidiary Merger
give examples of subsidiary mergers
Example:
- Planters Development Bank is a subsidiary of China Bank Savings (they are both considered a HORIZONTAL-SUBSIDIARY bank, horizontal kasi same industry, and subsidiary kasi nagging part ung smaller ng bigger)
Happens with the same scale/size (bali madidisolve ung same size and magiging part sila both ng parent company)
- Consolidation Merger
is one in which both the companies lose their identity as separate entities and become a part of a bigger new company. This is generally the case with both the companies being of the same size.
- Consolidation Merger
enumerate the ways of merger (a merger can take place in what ways?)
- By purchasing of assets
- By purchase of common shares
- By exchanging of shares for assets
- By exchanging of shares for shares
differentiate each ways of merger
- By purchasing of assets
- The assets of company Y may be sold to company X. Once this is done company Y is then legally terminated and company X survives. - By purchase of common shares
- The common share of company Y may be purchased by company X. When company X holds all the shares of company Y, it is dissolve. - By exchanging of shares for assets
- The company X may give their shares to stakeholders of company for its net assets. The company Y terminated by its shareholder who now holds share of company X. - By exchanging of shares for shares
- Company X gives its shares to the shareholder of company Y and then company X is terminated.
The assets of company Y may be sold to company X. Once this is done company Y is then legally terminated and company X survives.
- By purchasing of assets
The common share of company Y may be purchased by company X. When company X holds all the shares of company Y, it is dissolve.
- By purchase of common shares
The company X may give their shares to stakeholders of company for its net assets. The company Y terminated by its shareholder who now holds share of company X.
- By exchanging of shares for assets
Company X gives its shares to the shareholder of company Y and then company X is terminated.
- By exchanging of shares for shares
enumerate the reasons of merger
- Future goals
- Mutual benefits
- Maximizing profits
- Expansion of business
- Economy of scale
- Increase market share
- Cost maximization
- Diversification of risk
- Goodwill
- Product improvement
enumerate the benefits of merger:
- Diversification of product and service offerings
- Increase in plant capacity
- Larger market share
- Utilization of operational expertise and research and development (R&D)
- Reduction of financial risk
why should firms takeover? (enumerate)
- To gain opportunities of market growth more quickly than through internal means
- To seek to gain benefits from economies of scale
- To seek to gain a more dominant position in a national or global market
- To acquire the skills or strengths of another firm to complement the existing business Ls
- To acquire a speedy access to revenue streams that it would be difficult to build through normal internal growth
- To diversify its product or service range to protect itself against downturns in its core markets
why do mergers fail?
- Lack of human integration
- Mismanagement of cultural issues
- Lack of communication
