Mergers and Acquisitions Paper

Mergers and Acquisitions Paper - Mergers and Acquisitions...

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Mergers and Acquisitions Mergers and Acquisitions Paper Mergers, Acquisitions, And Corporate Restructuring FIN/444 October 13th, 2008 Introduction 1
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Mergers and Acquisitions Different market situations require different strategic approaches. This may never be more true than in the volatile finance world of mergers and acquisitions. It is important that managers know the difference between different types of mergers and only pursue these often difficult transactions when the firm has a good likelihood of a gain. Without a solid understanding of the pros and cons and the intricacies of mergers and acquisitions a manger pursuing a merger or acquisition is likely to do more harm than good for the firm’s involved. Horizontal Merger One of the most common types of mergers is the horizontal merger. A horizontal merger involves two firms that are both within the same specific industry. A horizontal merger benefits the firms that are combining by reducing competition and also taking advantage of economies of scale. A prime example of this type of merger is the merging of Walt-Disney and Miramax films. This high publicity merger combined an entertainment industry giant in Disney with a hip indie style movie film studio. It is considered a horizontal merger because the two firms were already in the same business before they merged. This is not to say that the two firms didn’t have their differences. According to Lyon, (2008), the combination of the two firms was at one point believed by many to be a serious culture clash. However according to the same article that merger has been a revenue driver over the long term and created growth for both entities fiscally and creatively. The two firms decided to merge to take advantage of each others strengths. Disney wanted the material which Miramax was creating that was 2
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Mergers and Acquisitions cutting edge and different from what Disney had access to up to that point. Miramax wanted deep pockets to fund it’s operations as well as the distribution channels that Disney had for it’s products. According to Lyon, (2008), Disney initially acquired Miramax in 1993 for 60 million dollars and in 2003 it was estimated to be worth approximately 3 billion dollars. Obviously this combination has been quite a success and seems to indicate positive possibilities for this type of merger if it is correctly executed. Vertical Mergers
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This note was uploaded on 08/17/2011 for the course BUS 200 taught by Professor Torres during the Spring '11 term at University of Phoenix.

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Mergers and Acquisitions Paper - Mergers and Acquisitions...

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