Transcript: An introduction Three forms of acquisition Friendly acquisition and hostile acquisition Reverse takeover and Reverse Merger Business Valuation Brand Considerations M&A failure (Poison Pill & Greenmail) Example Basic forms of acquisitions: 1. Merger or consolidation 2. Acquisition of stock 3. Acquisition of assets Posion Pill Greenmail Presentation outline and A reverse merger occurs when a privately held company buys a publicly listed shell company, usually one with no businesss and limited assets. Xiaoran Wang The factors influencing brand decisions in a merger or acquisition transactions can range from political or tactical. Brand value and costs are part of the factors that are considered. Presented by San Francisco Thank you ! Acquisition of Assets Greenmail is a practice of purchasing enough shares in a firm to threaten a takeover and thereby forcing the target firm buy those shares back at a premium in order to suspend the takeover. Stockholm Globally, companies have spent more than $1.57 trillion in deals, and nationally there have been more than 6000 transactions that add up to more than $722 billion. Telecommunications and healths lead the way with the four of the five biggest deals of the year through March. AT&T's bid to acquire T-Mobile USA at the top of Telecommunication industries. (cc) photo by jimmyharris on Flickr A shareholder' rights plan, is a type of defensive tactic used by a corporation's board of directors against a takeover. Shareholder rights plans were devised in the early 1980s as a way for directors to prevent takeover bidders from negotiating a price for sale of shares direcly with shareholders, and instead forcing the bidder to negotiate the board. Despite the goal of performance improvement, results from mergers and acquisitions are often disappointing. Numerous empirical studies show high failure rates of M&A deals. It refers to one firm can acquire another firm by buying all of its assets. Greenmail Acquisition Reverse Merger A form of transaction that enables a private company to be publicly listed in a relatively short time frame. Reverse Takeover & photo frame Friendlly acquisition: The companies corporate in negociations Hostile acquisition: The board/management of the target is not willing to be bought or the target's board has no prior knowledge of the offer (cc) photo by Metro Centric on Flickr Assets Reverse Merger Merger Refers to the absorption of one firm by Business Valuation Five most common ways to valuate a business are: Asset Valuation, Historical Earnings Valuation, Future Maintainable Earnings Valuation, Relative Valuation and Discounted Cash Flow (DCF) valuation. another. refers to the purchase of one business or company by another company or other business entity. Mergers and acquisitions Refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsdiary, other child entity or using a joint venture. (cc) photo by Metro Centric on Flickr However, hostile acquisition can /often do, ultinately become "friendly", as the acquiror secures endorsement of the transaction from the board of the acquiree company. This usually requires an improvement in the terms of the offer/ or through the negocation. Acquisition of stock To require another firm is to purchase the firm's voting stock in exchange of cash, shares of stock or other securities. Letter of Opinion of Value M&A Failure notes Budapest "FRIENDLY" AND "HOSTILE" ACQUISITIONS Corporate raids aim to generate large amounts of money by hostile takeovers of large, often undervalued or inefficient companies(non-profit-maximization), by either asset stripping and/or replacing management and employees. However, once having secured a large share of a target company, instead of completing the hostile takeover, the greenmailer offers to end the threat to the victim company by selling his share back to it, but at a substantial premium to the fair market stock price. Professionals who valuate businesses generally do not use just one of these methods but a combination of some of them, in order to obtain a more accurate value. Some companies use Whether a purchase is perceived as being "friendly" or "hostile" depends significantly on how the proposed acquisition is communicated and perceived by the target company's of directers, employees and shareholders. 2011 A smaller firm acquires management control of a larger and /or longer-established company and retain the name of the latter for the post-acquisition combined entity. Mergers and Acquistions Accurate business valuation is one of the most important aspects of M&A as valuations like these will have a major impact on the price that a business will be sold for. Most often this information is expressed in a Letter of Opinion
Transcript: Carnegie Steel, originally a steel making company decided to move backwards directly into the mining business for Steel extraction, transportation and Coke ovens. This meant that they didn't have to rely on other companies to supply the steel. Yamaha is a conglomerate, a company with many services and products. Some of their products and services include its Musical instruments, Motorbikes, Moto GP team, Hi-fi and even music recording. The company is split into those different divisions but the company acts as a whole being successful and profitable Merger and Acquisition Backwards Vertical Merger The Greene King brewer company bought Spirit Pubs which has over 1100 pubs in tow. This in total raises Greene King's pub count up to 3000 which would rack up much higher profits and spreads the risk across those extra percentage of pubs in the Greene King family. This is when two or more companies unite their assets and share their experience to become a more competitive and successful one. This includes companies joining up voluntarily or being bought up by another bigger business. There are different types of merging dependent on the companies that merge. What is merging? Horizontal Merger Fiat, a successful car manufacturer bought Ferrari, another successful car manufacturer in 1969 with a 50% stake in the company which would dramatically increase Ferrari's initial funds to be able to expand the company and improve research and development. However, on the 29th of October 2014, Fiat announced the splitting of the two companies as Ferrari wanted to become independent. How companies Grow the Merger way Conglomerate Merger Forwards Vertical Merger
Transcript: A + B = C Types: Merger Rudi Setiawan Acquisition Theory, Valuating, and Evidence Finance Myth; Synergy Consolidate Andrianto Pujihantoro Debt vs Equity Cash vs Stock Handayani Pricing Journal of Finance, Sept 92 Most of the time and type resulting negative abnormal return Motivation Efficiency Evidences Synergy Technology Related Terms A + B = Bigger A Where are the SYNERGY ??? on Conglomerate Diversification Merger and Acquisition Valuation Pricing Techniques Anup Agrawal, Jeffrey F. Jaffe and Gershon N. Mandelker A + B = AB Dividend Discount Model Discounted Cash Flow Asset Value Liquidation Value . Economic of Scale Share technology among comp. Payment The Post-Merger Performance of Acquiring Firms: A Re-Examination of an Anomaly Risk Management . V(AB) > V(A) + V(B) Status Quo + Control + Synergy = Fair value Corporate Finance Power Types Diversification Premium vs Discount Redistibution Tax Market Power Cashflow - Bond and Stock Agency Problem Change owner Quo status Winner Curse Price too high Lower synergy Operational Synergy vs Fiancial Synergy Merger Defend -Restructurin -Poison Pills -Poison Put -Anti take-over Amendment -Golden Parachute
Transcript: Main Points Why M&A Fail Merger and Acquisition Process Merger Reverse How to Prevent Failure Hostile Merger refers to the mutual consolidation of two or more entities to form a new enterprise with a new name. In a merger, multiple companies of similar size agree to integrate their operations into a single entity, in which there is shared ownership, control, and profit. The purchase of the business of an enterprise by another enterprise This can be done either by the purchase of the assets of the company or by the acquiring ownership over 51% of its paid-up share capital. Types Of Merger Acquisition Vertical Synergy Diversification/Sharpening business focus Growth Eliminate competition Increase supply chain pricing power Thank You Difference Types Motives Process Failure Culture Difference Flawed Intention No Guiding Principals No ground rules No detailed Investigation Friendly Continuous Communication. Transparency in Operations. Flexiabilty to meet new Cultures. Talented Managment. Merger and Acquisition Motives for Merger and Acquisition Types of Acquisition Conglomerate Horizontal Back-Flip
Transcript: Process -Begin with an offer (tender offer) Usually starts with discreet purchase of company's shares Can be friendly or hostile - Targeted company's response Accept the offer Negotiate the offer Defend against hostile takeover (poison pill) Find an alternative (white knight) - Close the deal Reasons why mergers & and acquisitions fail The bigger the company, the higher the opportunity in market share and capital and bigger challenges a company needs to face. In 2014 Lenovo bought Motorola from Google with half the patents and without their creativity division. Differences too big Acquisition Bigger company acquires smaller company in different country can affect the national economy Conclusion Decreases competition reach new market and grow revenues and earnings can expand their marketing mix developments as they may expand two companies’ marketing and distribution as well as giving them wider sales opportunities PRODUCT-EXTENSION MERGER to get new technology that the other company uses. to easily maintain their competitive advantage strategies such as innovation strategy, operation effectiveness strategy, cost-leadership strategy and differentiation strategy as stated by Michael Porter in his theory in 1985. ECONOMICS OF SCALE Reduced morale of employees due relocation and layoffs Kevin Bogdon & Daniel Precht CONGLOMERATION Synergy Why do companies do merger and acquisitions? In 2006 Pixar and Disney merged into one company MERGER AND ACQUISITION IMPROVE MARKET SHARE AND VISIBILITY Too much focus on acquisition Firing redundant workers can reduce company cost in operation According to Fred (2013), divestiture often used to raise capital for further strategic acquisitions or investment and it can be part of an overall retrenchment strategy to get rid of a business organization that are unprofitable, that require too much capital, or that do not fit well with the firm’s other activities. A merger occurs when two organizations about equal size unite to form one company Changed industry DEFENSIVE STRATEGY Outcomes A company buys most, if not all, of the company's ownership stakes in order to get control of the firm. Increased market share & less companies competing for market share Google acquired Motorola in 2010 with all their patents. Higher cost efficiency Less salary to pay ( less staff) Bigger buying power More technology at lower cost Glossary Between a customer and company or a supplier and company. Ex: a wheel supplier merging with a car maker. Wirtschaftsenglisch BKFR 2 2014 Two companies that have no common business areas. Other mayor reasons References Merger Two companies selling different but related products in the same market. http://wirtschaftslexikon.gabler.de/Definition/mergers-acquisitions.html http://www.acquisitions-mergers.de/ http://books.google.de/books? id=o6rquHQbeMEC&pg=PA85&dq=mergers+and+acquisitions+geschichte&hl=de&sa=X&ei=HDfYUrD CC8nRtAaT7oDIAg&ved=0CEMQ6AEwAw#v=onepage&q=mergers%20and%20acquisitions%20geschichte&f=false Types of mergers Too much debt VERTICAL MERGER Bigger company usually place order in buying material in larger quantity compared to small one and it can definitely save more cost. improved purchasing power to buy equipment or office supplies which means when place a larger orders, that particular company will have a greater ability to negotiate prices with their suppliers Smaller company gets acquired by bigger company HORIZONTAL MERGER Two companies that are in direct competition and share the same product lines and markets. Two car maker merger Definition of merger and acquisition Why do companies do m. and a. Types of merger Progress Reasons why m. and a. fail Outcomes Conclusion Thank you for your attention ! We hope you enjoyed it. Greater market reach Different cultures in business
Transcript: Case Study of Merger and Acquisitioin (M &A) between Porsche and Volkswagen (VW) Porsche = 27% Marketing Porsche's cashflow Limited financial capability of VW ! Outline Goodwill of Porsche: 1 billion euro Merger Porsche's huge financial probelm in July 2009 Analysis of M & A between Porsche & VW Porsche Debt Finance capability Profit Rate Conclution Different perspectives Solution Extend new consumer target 5 billion within one year 11 bilion within 5 years Background Marketing Definition of M & A Higher Profit Margin Acquisition VW= 15% Financial Liability of Porsche Beta out Thank you for your attention Do you have any questions? Huge and urgent debt of Porsche 2011 Porsche & VW's relationship Huge Financial Burden Defination of M & A Finance Feasibility Porsche owned a 50.7% stake of VW by 2009 Team ready (cc) photo by medhead on Flickr Porsche proposed M&A Background of Porsche & VW Financial Delta Porsche > VW Extended Market profit rate Loop check of the solution Porsche Liability to Banks Accept /Reject M &A ? VW's Financial Capability VW rejects the proposal of M & A
Transcript: Tata Motors & Ford Motors (Jaguar & Land rover) Company Background Company background JAGUAR Jaguar Cars was the company that was responsible for the production of Jaguar cars until its operations were fully merged with those of Land Rover to form Jaguar Land Rover on 1 January 2013. Jaguar's business was founded as the Swallow Sidecar Company in 1922, originally making motorcycle sidecars before developing bodies for passenger cars. The company's name was changed from S. S. Cars to Jaguar Cars in 1945. A merger with the British Motor Corporation followed in 1966, the resulting enlarged company now being renamed as British Motor Holdings (BMH), which in 1968 merged with Leyland Motor Corporation and became British Leyland, itself to be nationalised in 1975. Jaguar was spun off from British Leyland and was listed on the London Stock Exchange in 1984, becoming a constituent of the FTSE 100 Index until it was acquired by Ford in 1990. Ford owned Jaguar Cars, also buying Land Rover in 2000, until 2008 when it sold both to Tata Motors. Tata created Jaguar Land Rover as a subsidiary holding company. At operating company level, in 2013 Jaguar Cars was merged with Land Rover to form Jaguar Land Rover Limited as the single design, manufacture, sales company and brand owner for both Jaguar and Land Rover vehicles. Jaguar Cars was the company that was responsible for the production of Jaguar cars until its operations were fully merged with those of Land Rover to form Jaguar Land Rover on 1 January 2013. Jaguar's business was founded as the Swallow Sidecar Company in 1922, originally making motorcycle sidecars before developing bodies for passenger cars. The company's name was changed from S. S. Cars to Jaguar Cars in 1945. A merger with the British Motor Corporation followed in 1966, the resulting enlarged company now being renamed as British Motor Holdings (BMH), which in 1968 merged with Leyland Motor Corporation and became British Leyland, itself to be nationalised in 1975. Jaguar was spun off from British Leyland and was listed on the London Stock Exchange in 1984, becoming a constituent of the FTSE 100 Index until it was acquired by Ford in 1990. Ford owned Jaguar Cars, also buying Land Rover in 2000, until 2008 when it sold both to Tata Motors. Tata created Jaguar Land Rover as a subsidiary holding company. At operating company level, in 2013 Jaguar Cars was merged with Land Rover to form Jaguar Land Rover Limited as the single design, manufacture, sales company and brand owner for both Jaguar and Land Rover vehicles Land Rover LAND ROVER Land Rover is a British brand of four-wheel drive cars that exclusively offers premium and luxury sport utility vehicles. Owned by multinational car manufacturer Jaguar Land Rover (JLR), which has been owned by India's Tata Motors since 2008, JLR currently build Land Rovers in Brazil, China, India, Slovakia, and the United Kingdom. The Land Rover name was originally used by the Rover Company for a boxy four-wheel drive, off-road model, launched in 1948—now known as the Land Rover Series, it is today regarded as a British icon. Over time, Land Rover grew into its own brand (and for a while also a company), encompassing a consistently growing range of four-wheel drive, off-road capable models. Starting with the much more upmarket 1970 Range Rover, and subsequent introductions of the mid-range Discovery and entry-level Freelander line (in 1989 and 1997), as well as the 1990 Land Rover Defender refresh, the marque today includes two models of Discovery, four distinct models of Range Rover, and after a three-year hiatus, a second generation of Defenders have gone into production for the 2020 model year—in short or long wheelbase, as before. Land Rover is a British brand of four-wheel drive cars that exclusively offers premium and luxury sport utility vehicles. Owned by multinational car manufacturer Jaguar Land Rover (JLR), which has been owned by India's Tata Motors since 2008, JLR currently build Land Rovers in Brazil, China, India, Slovakia, and the United Kingdom. The Land Rover name was originally used by the Rover Company for a boxy four-wheel drive, off-road model, launched in 1948—now known as the Land Rover Series, it is today regarded as a British icon. Over time, Land Rover grew into its own brand (and for a while also a company), encompassing a consistently growing range of four-wheel drive, off-road capable models. Starting with the much more upmarket 1970 Range Rover, and subsequent introductions of the mid-range Discovery and entry-level Freelander line (in 1989 and 1997), as well as the 1990 Land Rover Defender refresh, the marque today includes two models of Discovery, four distinct models of Range Rover, and after a three-year hiatus, a second generation of Defenders have gone into production for the 2020 model year—in short or long wheelbase, as before. Type of Merger Type of merger -The acquisition between Tata Motors Ltd. and Ford Motors is an example of a Who My
Transcript: Merger and Acquisition Introduction Topic 1 Merger:Consolidation of two organizations into a single one. Acquisition: Takeover of one company by another company. Both are strategic activities that are seen as the fastest way to achieve growth strategy or financial growth (i.e. increase market share, new product line, enter a new market, expand distribution system). Benefits: Strategic, Financial and Management needs. Subtopic 1 Subtopic 2 Timeline Timeline YEAR Click to edit text Click to edit text Topic 2 Topic 2 Topic 3 Topic 3 Topic 4 Topic 4
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