a merger, an acquisition

(noun)

Mergers and acquisitions (abbreviated M&A) is an 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 subsidiary, other child entity or using a joint venture.

Related Terms

Examples of a merger, an acquisition in the following topics:

  • Consolidation Strategy

    • This activity can help an enterprise grow rapidly in its sector or location of origin or expand into a new field or new location.
    • M&A is different from joint ventures and other forms of strategic alliance, as mergers or acquisitions aim to create a single organization.
    • The distinction between a "merger" and an "acquisition" has become increasingly blurred in various respects (particularly in terms of the ultimate economic outcome), although it has not completely disappeared.
    • In an acquisition, one organization buys out another, with the acquired company usually placing its processes under the brand name of the acquirer.
    • Not every merger with a new name is successful.

  • Surprises and Returns

    • Announcements of Mergers and acquisitions (M&A) are a frequent type of surprise announcements.
    • Mergers and acquisition is a category of announcement that deals with corporate structure.
    • A merger or an acquisition could signal to an analyst that one particular company is financially weak, and it could downgrade its long run outlook for that company.
    • Alternatively, an M&A announcement could also signal to analysts that a company has a chance to increase its market share and henceforth its profits.
    • A company's instruments are subject to move in the event of an aforementioned announcement or if a private rating agency (Standard and Poors or Moody's) changes its outlook on their debt.

  • Reasons for Combining Businesses

    • Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it is technically an acquisition.
    • A merger can also be achieved independently of the corporate mechanics through various means - such as triangular merger, statutory merger, etc.
    • Hiring: Some companies use acquisitions as an alternative to the normal hiring process.
    • Diversification: A merger may hedge a company against a downturn in an industry by providing the opportunity to make up profits in the industry of the target company.
    • Additional motives for a merger that may not add shareholder value include:

  • Mergers and Acquisitions (M&As)

    • Exxon and Mobil officially signed an agreement and plan of merger on December 1,1998.
    • Mergers and Acquisitions (M&A) refers to the aspect of corporate strategy, corporate finance, and management dealing with the buying and selling of different companies and similar entities that can help an enterprise grow rapidly.
    • Mergers and Acquisitions have, at times, failed to add as much value as initially imagined by the parties involved.
    • Diversify if (cost of having units A & B in same firm) < (cost of unit A in firm A) + (cost of unit B in firm B) - Boost in Willingness To Pay (aka, cross-selling) - Diversify if (WTP of activities A & B if done in same firm) > (WTP of activity A in firm A) + (WTP activity B in firm B)
    • Mergers and Acquisitions (M&A) refers to the aspect of corporate strategy, corporate finance, and management dealing with the buying and selling of different companies and similar entities that can help an enterprise grow rapidly.

  • The Role of an Advisor

    • The advisory group of an investment bank is primarily concerned with facilitating the mergers and acquisitions of businesses.
    • The advisory group in an investment bank is often termed M&A.
    • M&A stands for "mergers and acquisitions", which refers to the the buying, selling, dividing and combining of different firms.
    • For example, if a company wants to sell of an unprofitable division, they will hire an investment bank to find a company that would want to buy it.
    • In order for the acquisition to take place, the two boards and leadership must be agree on the terms.

  • M&A Trends

    • Mergers and acquisitions (M&A) are a significant aspect of modern strategy, particularly in the technology and pharmaceutical arenas.
    • The mergers and acquisitions by these five companies alone represents the acquisition of hundreds of business and hundreds of billions of dollars.
    • Microsoft - Since 1987, Wikipedia lists a total of 197 acquisitions for Microsoft.
    • IBM - IBM is an enormous organization with acquisitions ranging from software storage and management, streaming video, cyber security, salesforce systems, mobile APIs, healthcare, cloud security and capabilities, behavioral marketing, cognitive computing, and an incredibly wide range of other technical abilities.
    • This is a list of M&A reasoning over time, starting with the horizontal mergers in the late 19th century and moving into the globalization movements in the 21st century.

  • Valuing the Target and Setting the Price

    • In order to prepare an appropriate bid in the mergers and acquisition process, the buyer must be able to accurately value the target company.
    • Due diligence can be defined as the examination of a potential target for merger, acquisition, privatization, or a similar corporate finance transaction– normally by a buyer.
    • Moreover, due diligence is an investigation on the current practices of process and policies and an examination aiming to make an acquisition decision via the principles of valuation and shareholder value analysis.
    • This is in order to reduce the number of failed mergers and acquisitions.
    • Intellectual property is an asset of a business that must be included in the overall business evaluation.

  • Types of Transactions

    • Transactions can be mergers or acquisitions, made with cash or stock, and they can be friendly or hostile.
    • Transaction costs include fees for preparation of a proxy statement, an extraordinary shareholder meeting, and registration.
    • In the aftermath of a merger, there will be accounting issues to consider.
    • Pictured is a plane belonging to United Airlines, one of the world's largest carriers, fresh off a 2010 merger with Continental Airlines.
    • Choose the best strategy and method for completing a merger or acquisition

  • The State of Competition

    • Current competition can be examined through market dominance, mergers and acquisitions, public sector regulation, and intellectual property.
    • A merger or acquisition involves, from a competition perspective, the concentration of economic power in the hands of fewer than before.
    • Since mergers and acquisitions can lead to market dominance, competition law attempts to deal with this problem before it arises.
    • Trade secrets, if they remain a secret, having an eternal length of life.
    • Describe how market dominance, mergers and acquisitions, public sector regulation, and intellectual property contribute to the current state of competition

  • Other Topics in M&A

    • Despite the goal of value creation and synergy, results from mergers and acquisitions are often disappointing compared with results that are predicted or expected.
    • A form of corporate cooperation lying between a merger or acquisition and internal growth is called a corporate alliance, or strategic alliance.
    • When raising funds for a merger or acquisition, firms may not seek funds from public offerings - either out of necessity or by choice.
    • From an M&A point of view, a private placement is thus similar to a merger because it usually involves an institution (rather than numerous public investors) acquiring a stake (assets) in a company.
    • Explain why a company may want to divest itself of an acquisition