justification of mergers & acquisitions

8/7/2019 Justification of Mergers & Acquisitions

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Presenter : Naveen Raju

ID : 1115415

Topic : Justification of

Mergers & Acquisitions

Lecturer : Dr. Chan Kok Eng

Executive ReportingPresentation


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What explanations forMergers & Acquisitions

would you offer if it were found that they

rely produce Positive financial Gains fothe shareholders?

Q u e s t i o n :


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e c u t i v e S u m m a r y- More and more companies are going for

Mergers & Acquisitions for reasons likeSynergy, Reduction of Competition,Increased Market share, Economies of Scale, Improved Cost Efficiency.

- The Shareholders rarely get the FinancialGains

- Analysis say that Cash-financed Mergersare better than Stock-financed Mergers

- It is recommended that Stockholders mustbe encouraged to actively involve in the

decision-making process


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r g e r & A c q u i s i t i o n

rgers & Acquisitions Corporate strategy, corporate finamanagement dealing with the buying, selling & combininifferent companies that can aid, finance, or help a growingpany in a given industry grow rapidly without having to

ate another business entity.


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A P l u s & M i n u s e s

Advantages

Synergy

ReducedCompetition

Increased MarketShare

Resource Transfer

Economies of Scale

Disadvantages

Poor Organization Fit

Acquirer s Stock fall

Size Issue Conflicts


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Click to edit Master text stylesSecond level Third level

Fourth level Fifth level

to edit Master text stylesd levelird levelourth levelFifth level

Profit-5 billion US$ Profit-3.36 billion US$

Combined Profit8.36 billion US$

a l - L i f e E x a m p

l e

2005


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a l - L i f e E x a m p l e

2005

2006


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Profit After Merger10.37 billion US$

a l - L i f e E x a m p l e


2005

2007


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A F a i l u r e A n a l y s i s

Agency Theory Corporations can function

effectively even though their managers arehighly self-interested

Protecting ShareholderInterest

Stockholders interest inGreater Returns

Managers are Self-interested & Unwillingto sacrifice them


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Agency Theory Corporations can function

effectively even though their managers arehighly self-interested

Protecting ShareholderInterest

Stockholders interest inGreater Returns

Managers are Self-interested & Unwillingto sacrifice them

A F a i l u r e A n a l y s i s


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a i l u r e A n a l y s i s

Size Issues

UnsuccessfulDiversification

Paying in Stock instead of Cash

- Mismatch between theAcquirer & the Acquiree

- Merger between companiesfrom different industrybackgrounds

- Resulting in Stock fall of the Acquirer


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a i l u r e A n a l y s i s

Poor Strategic Fit

Paying Too Much

- Incompatible Strategies of the two Organizations

- Highest bidder winsAcquiree resulting inFinancial crunch

Poor OrganizationFit

- Mismatch betweenAdministrative Practices,Cultural Practices


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t o m a k e S u c c e s s f u l M & A

Pay Sensiblyfor acquiring

the TargetCompany

Successful Merger or Acquisition

Merge with Company h

Right Industry fitCompatible StrategCulture

Ra tio of Cash to be higher than Stock to acquire


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e c o m m e n d a t i o n s

Make sure what is good forManagement is good for

Stockholders as well

Establish a Strong & IndependentBoard of Directors representing

StockholdersEncourage Stockholders to Actively

take part in Decision-makingProcess


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R e f e r e n c e

-http://www.springerlink.com/content/j06k733x25t80440/ -http://www.aims-international.org/P1.1.4.pdf -http://www.uwsp.edu/BUSINESS/CWERB/2ndQtr01/SpecialReportQt

-Organizational Behaviour 9th Edition Shermerhorn/Hunt/Osborn
http://www.springerlink.com/content/j06k733x25t80440/http://www.aims-international.org/P1.1.4.pdfhttp://www.uwsp.edu/BUSINESS/CWERB/2ndQtr01/SpecialReportQtr2_01.htmhttp://www.uwsp.edu/BUSINESS/CWERB/2ndQtr01/SpecialReportQtr2_01.htmhttp://www.aims-international.org/P1.1.4.pdfhttp://www.springerlink.com/content/j06k733x25t80440/


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THANKYOU

justification of mergers & acquisitions

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