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L_Mergers - M er ger s and Acquisit ions Outlines...

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Mergers and Acquisitions
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Outlines Definition M&A activity Reasons for M&A Good vs Bad M&A Best interest of shareholders? Methods for paying for an acquisition Defensive tactics Valuing M&A transaction/Estimating gains from M&A
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Merger Merger One firm is acquired by another Acquiring firm retains name and acquired firm ceases to exist Advantage – legally simple Disadvantage – must be approved by stockholders of both firms
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Acquisitions A firm can be acquired by another firm or individual(’s) purchasing voting shares of the firm’s stock Stock acquisition No stockholder vote required Can deal directly with stockholders, even if management is unfriendly May be delayed if some target shareholders hold out for more money – complete absorption requires a merger
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Acquisitions Classifications Horizontal – both firms are in the same industry Vertical – firms are in different stages of the production process Conglomerate – firms are unrelated
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Takeovers Control of a firm transfers from one group to another Possible forms Merger or consolidation Acquisition of stock Acquisition of assets
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