Mergers and Acquisition
Reasons
1. Growth 2. Synergy NAV = PVab – ( PVa + PVb ) – P – E 3. Managerial efficiency 4. Market entry 5. Diversification 6. Tax shields 7. Strategic
Some unstated reasons for acquisitions: 1. Megalomania 2. Hubris spirit
Forms of Business Combinations
1. Consolidation: result: a new firm e.g. Sandoz + Ciba Geigy = Novartis
2. Merger: result: only one survive e.g. HDFC BK + TIMES BK = HDFC
3. Takeovers: control over mgmt thru substantial portion of its equity. e.g. Credit Swiss Group controlled First Boston’s Mgmt thru Equity acquisition. Both remained in existence.
4. Asset purchases: A buyout a division or assets of T e.g. Coca-Cola paid Rs 170Cr to Parle for its Soft drinks brands like Thumps up, Limca, Gold Spot, etc.
The Acquisition Process
1. Acquisition Search
2. Approaching the Target
a. Passive Strategy
b. Active Strategy
3. Valuation
a. Discounted Cash Flow Method
b. Comparable Companies Method
c. Book Value Method
d. Market Value Method
4. Negotiation
5. Due Diligence
6. Acquisition Finance
Sell-offs
1. Opportunistic
2. Forced
3. Planned
Forms of Corporate Downsizing
1. Spin-Off
A new legal entity is created to takeover the operations of an existing division.The Shares of the new unit is distributed pro rata among the existing share holders.
2. Split-Off
A new legal entity is created to takeover the operations of an existing division. The Shares of parent co are exchanged for the shares of the new co. Hence the share-holding of the new entity does not reflect the share holding of the parent firm.
3. Split-Up
A complete break up of a company into two or more and parent firm ceases to exist.
4. Equity Carveouts
Conversion of existing division or unit into a wholly owned subsidiary.Result in positive cash flow.
5. Divestitures
Outright sale of a portion of the firm to outsiders. The firm receives purchase consideration in the form of cash or securities or both.
The Divestitures Process
1. Developing Sale Strategy
a. Negotiated sale
b. Auction sale
2. Valuation
3. Drafting offer memorandum
a. Executive Summary
b. Sale procedure
c. Background
d. Operations
e. Marketing
f. Human resources
g. Financial
4. Identify potential buyers
5. Negotiation & Closing the deal
Corporate Restructuring
1. Going Public
2. Going Private
3. Joint Venture
KILLER BEES
Killer bees are firms or individuals that are employed by a target company to fend off a takeover bid; these include investment bankers (primary), accountants, attorneys, tax specialists, etc. They aid by utilizing various anti-takeover strategies, thereby making the Target Company economically unattractive and acquisition more costly.
POISON PILLS
It derives from its original meaning of a literal poison pill carried by various spies throughout history, taken when discovered to eliminate the possibility of being interrogated for the enemy's gain. Several types of defense have been called "poison pills" because they not only harm the bidder but the target (or its shareholders) as well.
According to the Regs. §1.708-1(b)(4), if the partnership occurs such a Technical Termination, “The partnership contributes all of its assets and liabilities to a new partnership in exchange for an interest in the new partnership; and, immediately thereafter, the terminated partnership distributes interests in the new partnership to the purchasing partner and the other remaining partners in proportion to their respective interests in the terminated partnership in liquidation of the terminated partnership, either for the continuation of the business by the new partnership or for its dissolution and winding up.” Thus, it becomes a deemed new partnership.
Cost cutting, discontinuation of product or services ,technological changes, and consolidation due to mergers and acquisitions are commonly legal ac...
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
The corporation’s business is carried out by its management, under the direction of the Board of Directors. The Board, and each committee of the Board, has complete access to management. Also, the Board and committee member’s has access to independent advisors as each considers necessary or appropriate. Mallor, Barnes, Bowers, & Langvardt (2010) state that the Board of Directors also, issues shares, Adopts articles of merger or sha...
It is proper to present a business definition of merger as it found on legal reference with the ultimate goal in the pursuing of an explanation on which this paper intents to present. A merger in accordance with the textbook is legally defined as a contractual and statuary process in which the (surviving corporation) acquires all the assets and liabilities of another corporation (the merged corporation). The definition go even farther to involve and clarify about what happen to shares by explaining the following; “the shareholders of the merged corporation either are paid for their share or receive the shares of the surviving corporation”. But in simple terms is my attempt to define as the product or birth of a corporation on which typically extends its operation by combining with another corporation. So from two on existence corporations in the process it gets absorbed into becomes one entity. The legal definition also implied more than meet the eye. The terms contractual and statuary, it implied a process on which contracts and statuary measures emerge as measures to regulate, standardized, governing or simply at times may complicate whole process. These terms provide an explicit umbrella and it becomes as part of the agreement formulating or promoting a case for contracts to be precedent, enforced or regulated in a now or in the future under a court of law under the Contract Business Law Statue of Practice. As for what happens to the shares of the involved corporations no more explanation is needed as the already actions mentioned clearly stated of the expectations of a merge’s share involvement.
Marks and Spenser alternative for the substantive growth can take the following strategies, horizontal integration, related diversification, vertical integration and unrelated diversification.
...ative aspects of diversification, for example through better corporate planning, human recourse management and reaching further synergies between its various business lines.
This report comprises of the explanation of two different companies working in different market fields, the two companies I’ve chosen are Primark and Samsung I am going to write about the influence of the 4vs which are the volume of output, variation in demand for output, visibility of production, and variety of output. I am also going to look at the performance objectives in each of the companies. Example, for a given year and how they are able to reach their objectives, and also the effect on the cost efficiency of the operations.
Firms exist with the purpose of create and deliver economic value (Bensaco et al 2010, p. 365); therefore, business that create better economic value than its competitors will attain an advantage position in market place. Companies might try to improve its sales (profit) through domestic expansion, product diversification or by internationalisation; this report will focus on the reasons of espressamente Illy to expand internationally; additionally, its sources of competitive advantage and, the analysis of three markets in which company want to participate.
To conclude, these issues are holding back the firm from being able to sustain profitability to a great extent. If these are resolved, then it can help the firm to form an overall profitability as each of its subsidiaries will contribute to be profitable by functioning only in the packaging sector or exploring new markets.
When Woolly Ltd and Jumper Ltd conduct intragroup transactions, as separate legal entities these transactions are recorded as normal however, from the point of the group these transactions are internal and therefore are not recognized by external users, thus the transactions must be eliminated. Finally, non-controlling interest occurs when the parent owns less than 100% of the subsidiary, however this is not relevant to Woolly Ltd as ownership of Jumper Ltd is 100%. These steps are imperative in the consolidation worksheet, as they enable the proper addition of assets and liabilities and the determination of profit or loss and net tax effects. Directors need to be able to view the financial performance of the group in order to make relevant and informed decisions. In order to obtain this information, the correct procedures, as mentioned, must be followed to ensure that assets are not overstated and liabilities understated.
3. Analyze BP using the five forces of competition model to determine the industries current attractiveness in terms of profits potential Danger of Incipient Entrants - The more effortless it is for beginning organizations to enter the business, the more vicious rivalry there will be. Variables that can repress the risk of early contestants are kenned as obstructions to entrance. A few cases include:• Power of Suppliers - This is the amount of weight suppliers can put on a business. In the event that one supplier has a cosmically sufficiently enormous effect to influence an organization 's edges and volumes, then it holds generous puissance.
The Principle of Separate Corporate Personality The principle of separate corporate personality has been firmly established in the common law since the decision in the case of Salomon v Salomon & Co Ltd[1], whereby a corporation has a separate legal personality, rights and obligations totally distinct from those of its shareholders. Legislation and courts nevertheless sometimes "pierce the corporate veil" so as to hold the shareholders personally liable for the liabilities of the corporation. Courts may also "lift the corporate veil", in the conflict of laws in order to determine who actually controls the corporation, and thus to ascertain the corporation's true contacts, and closest and most real connection. Throughout the course of this assignment I will begin by explaining the concept of legal personality and describe the veil of incorporation. I will give examples of when the veil of incorporation can be lifted by the courts and statuary provisions such as s.24 CA 1985 and incorporate the varying views of judges as to when the veil can be lifted.
The other way is Organic growth, when a company increases the turnover of the existing
Mergers mean two or more companies combining together to form one business or firm. There are six different types of mergers: Horizontal, Vertical, Conglomerate, Market extension, Product Extension and Diversified activity.