M&A

(noun)

Mergers and acquisitions (M&A) are aspects 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 M&A in the following topics:

  • Other Topics in M&A

    • M&A also includes the areas of value creation, corporate alliances, private equity, and divestitures.
    • Numerous empirical studies show high failure rates of M&A deals.
    • Employee turnover also contributes to M&A failures.
    • However, higher success rates have been experienced recently, due to firms gaining more and more experience with the M&A process.
    • 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.

  • The Role of an Advisor

    • 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.
    • Investment banks play a large role in facilitating M&A deals.
    • Once the advisory group is hired by a company looking to sell itself to another, it will put together something called a pitch book.

  • International Credit Rating Agencies

    • Two well-known credit agencies are A.M Best and Coface.
    • A.M.
    • A.M.
    • A.M.
    • A.M.

  • Overview of Investment Banking Functions in M&A

    • With increasing competitive pressures being placed on businesses and the trend towards globalization, companies are engaging more and more in M&A activity.
    • This normally will include a full valuation and recommended tactics.
    • An investment bank that represents a potential seller has a much greater likelihood of completing a transaction (and therefore being paid) than an investment bank that represents a potential acquirer.
    • Generally speaking, the work involved in finding a buyer includes writing a "Selling Memorandum" (a detailed sales document) and then contacting potential strategic or financial buyers.
    • Of course, buying a company will require the funds to do so.

  • Chapter Questions

    • How could a firm protect its business in a foreign country by using facility location, intellectual property rights, and leverage?
    • How does a firm use export creation to reduce a country risk?
    • You had purchased bonds from a country with a CCC credit rating.
    • How would you rate Hong Kong using A.M.
    • How would you rate the Ukraine using A.M.

  • Answers to Chapter 20 Questions

    • A firm only invests and operates a small portion of its production in a foreign country.
    • The Risk Rating System is a method to measure a country risk.
    • A country's score is a weighted average of the four factors.
    • Hong Kong is politically stable, and A.M.
    • A.M.

  • Future Value of Annuity

    • It is possible to take the FV of all cash flows and add them together, but this isn't really pragmatic if there are more than a couple of payments.
    • For both of the formulas we will discuss, you need to know the payment amount (m, though often written as pmt or p), the interest rate of the account the payments are deposited in (r, though sometimes i), the number of periods per year (n), and the time frame in years (t).
    • where m is the payment amount, r is the interest rate, n is the number of periods per year, and t is the length of time in years.
    • Provided you know m, r, n, and t, therefore, you can find the future value (FV) of an annuity.

  • Compounding Frequency

    • Financial analysts always define an interest rate as an annual term, called the Annual Percentage Rate (APR).The APR come from the Federal Reserve's regulation that helps prevent fraud.For example, do you consider a 1% interest rate a good interest rate to charge a borrower?
    • Unfortunately, we do not know the time period this interest rate applies to because the time period was omitted.If the 1% is annual, then it is an excellent interest rate for a loan.However, if it is daily, subsequently, this rate is terrible.Borrower took money from a loan shark.For this book, we define all interest rates in annual terms, unless otherwise stated.
    • Banks and finance companies usually calculate interest payments and deposits monthly.Thus, we adjust the present value formula for different time units.If you refer to Equation 11, we add a new variable, m, the compounding frequency while APR is the interest rate in annual terms.In the monthly case, m equals 12 because a year has 12 months.
    • Compounding frequency has a special case.As m approaches infinity (m → ∞), the compounding equation transforms into Equation 16, called continuous compounding.Continuous compounding means for every fraction of a second; your balance earns interest.Abbreviation, lim, refers to the limit and defines how the function behaves when m becomes very large.Thus, the number e is a constant and equals approximately 2.1828.Number e is similar to pi, and its digits do not repeat any patterns.
    • $FV_T=\text{lim}_{m\rightarrow \infty }PV_0\left(1+\frac{APR}{m} \right )^{T \cdot m}=PV_0 \cdot e^{APR \cdot T}$

  • Calculating Annuities

    • Perpetuities don't have a FV because they don't have an end date.
    • To find the FV of a perpetuity at a certain point, treat the annuity up to that point as one of the other two types.
    • The PV of a perpetuity is the payment size divided by the interest rate:
    • where m is the amount amount, r is the interest, n is the number of periods per year, and t is the number of years.
    • Solving for the interest rate or number of periods is a bit more complicated, so it is better to use Excel or a financial calculator to solve for them.

  • Quantity Theory of Money

    • A country's real income is Y, and economists measure real income by a country's real GDP.Moreover, P × Y represents a country's nominal GDP.
    • Supply and demand for money must equal each other because a central bank injects money into the economy that the public uses.
    • We switched the variables to lower case with a dot above each one to indicate a percentage change for that variable.
    • $\dot{s}=\left ( \dot{m}_{\text{U.S.}}^{ S} -\dot{m}_{\text{euro}}^{S} \right )+\left ( \dot{v}_{\text{U.S.}} -\ dot{v}_{\text{euro}} \right )+\left ( \dot{y}_{\text{euro}} -\dot{y}_{\text{U.S.}} \ right )$
    • Consequently, the higher real income and a slower expanding money supply strengthen the euro.