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Mergers and Acquisitions
Mergers and acquisitions are business strategies that deal with selling, buying, and combining of companies. Mergers occur when two or more companies are joined together. When one company buys another, either through friendly or hostile takeover, it is called acquisition.
593 Questions
Why did Singapore want merger?
The PAP government saw thatSingapore's best hope for complete freedom is to merge with Malaya. While internal self government was previously granted in 1959, there were some areas like defence and internal security that were still under British control Secondly it is to have a common market with Malaya.
aditya birla group
tata industries
etc.
A takeover which goes against the wishes of the target company's management and board of directors.
Can you give a real life example of a lateral merger?
if a distillery eg Smirnoff had to merge with a brewery { any beer manufacturer} that would form a lateral merger, as distilling and brewing are sperate techniques but a lateral merger would lead to cost cutting...
Hope that helped :)
What is a cartel and is such merger profitable?
A cartel is a joing of all business of same sort to form a single business. Cartel mergers are profitable. For example there are three firms which behave as a cartel, if all firms collude to act as a single firm, the merger will be profitable in oligopolistic industries. It will ensure the firm will gain an economic profit and will eventually drive off the weaker firm and the price benifit will go to consumers. (Term cartel is used when similar businesses merge to form a single business, a monopoly).
How much was the ratio when reliance pertoleum merger with reliance industries?
tell me about it a si had shares in that
A Vertical Merger is a company merger that involves the union of a customer with a vendor. The two companies involved in the merger produce different but complimentary products. The vertical merger can also take place as a means of combining assets to capture a sector of the market that either company could manage on their own.
A radio "stick" value is what a non-cash flowing station is worth. Typically stations trade at a multiple of broadcast cash flow. Because station's FCC licenses are valuable, there is still an underlying value to the station, even with zero or negative cash flow.
Riordan Manufacturing Merger Acquisition SWOT Analysis?
Merger Creates Wealth
For Riordan Manufacturing to gain from a merger it has to create synergies. Synergies are anticipated benefits from the merger. Basically shareholders of both firms must come to a consensus that merged stocks is more beneficial than holding to individual share of the merging companies Factors contributing to a pro-merger argument are: (1) economy of scale; (2) tax benefits; (3) capitalization on unused debts; (4) complimentary in financial slack; (5) removal of ineffective managers; (6) increased market power; (7) reduction in bankruptcy costs; and (8) buying below replacement costs merger.
Economy of Scale.
"Wealth can be created in a merger through economies of scale." In a typical merger number of operational layers become one; thus, redundancies are eliminated. Also, by merging two entities better producing resources are kept and unwanted financial burdens are phased out.
Tax Benefits.
Tax reduction through a merger is in fact creation of wealth.There are two ways that tax-benefits can create wealth: (1) utilization of operation loss tax-credit (forward and back); and (2) reevaluation of depreciated assets.
Utilization of operation loss tax-credit.
In a merger, it is stipulated that one of the two merging firms has a weaker financial status; and the other merging firm has strong finances. Tax credits gained from operation loss by one of the merging firms can compensate for tax liabilities incurred by profitability of the other firm.
Reevaluation of depreciated assets.
In a merger, previously depreciated assets can be revalued and tax benefits arising from increased depreciation of revalued assets create wealth.
Capitalization on Unused Debts.
Companies for various reasons may not take maximum advantage of their debt capacity. Merger creates climate of development opportunities, and a strong management that emerges from the merger can increase debt financing, and fully utilize the tax benefits associated with the increased advantage.
Complimentary in Financial Slack.
"When cash-rich bidders and cash-poor targets are combined, wealth may be created." A cash-poor entity has a more difficult time accessing market capital; therefore, a merger allows positive net present value project to be accepted.
Removal of Ineffective Managers.
Merger opens the door for a wider selection of human capital, especially selecting effective managers. If one of the merged firms has ineffective management, as a result of the merger, more effective managers are kept and others are marginalized or eliminated.
Increased Market Power.
"The merger of two firms can result in an increase in market or monopoly power." Although a merger that monopolizes a market is illegal; nonetheless, such merger creates wealth and provides wider market access and cross-marketing opportunities to both merging firms.
Reduction in Bankruptcy Costs.
Undoubtedly, diversification minimizes enterprise failure. In case where a firm is failing and is forced to a possible liquidation or bankruptcy be creditors, assets are sold at a depressed value, and what channels down to stockholders are even less amusing since legal fees and selling costs are levied before disbursement of any fund to anyone. A merger may be a good solution for the creditors and the stockholders to absorb least amount of collateral damage.
Buying Below Replacement Costs Merger.
"Situations sometimes arise where it is cheaper to acquire an entire company than to acquire the assets the company owns." Due to reality of market, sometimes it is cost-effective to merge with a rival to acquire its assets than to attain those assets in any other way.
Determination of a Firm's Value
For a merger to be of value to Riordan Manufacturing, the company must analyze the value of the potential merger by quantifying the worth of acquired firm (Reference book Chapter 23 page 808). The value of acquired firm depends on number of elements such as: (1) book value; (2) appraisal value; (3) "chop-shop" or "break-up" value; (4) "free cash flow" or "going concern" value.
Book Value.
"Book value generally used in this context to refer to the book or historical cost value of the firm's net worth."
Appraisal Value.
Appraisal value is quantifying the worth of a company by an independent appraiser. This value is closely tied to the replacement cost of the assets.
"Chop-Shop" or "Break-Up" Value.
Dean Lebaron and Lawrence Speidell theorized that multiline companies that are undervalued can worth more if separated and sold individually.
"Free Cash Flow" or "Going Concern" Value.
The going concern value is estimated based on "incremental fee cash flows to the bidding firm as a result of the merger or acquisition."
Situational Analysis
Riordan Manufacturing has two derogatory circumstances: first, replacement of the Pontiac plant with a plant in Mexico; and second, excess cash. These circumstances create numerous opportunities and conflicts for the company; however, with proper planning, the company can capitalize and reach a net gain.
Pontiac Plant Closure
Based on the company's executive summary, the Pontiac plant is was shut down; however, to make matter more unfavorable is opening of the Mexican factory, which at the very minimal raises eyebrows over jobs going south. This negative publicity can have tremendous impact with the Defense Department, one of Riordan's clientele.
As a recourse to loosing clientele due to closure of Pontiac Plant and shifting operations south to the Mexican Factor, Riordan Manufacturing may choose to acquire or merge with a U.S. based company in the same industry that is suffering due to lack of access for capital or poor management disciplines and practices.
Excess Cash
Excess cash on hand can be problematic, because, it is display of management's inability to manage resources properly. Additionally, the company paid $943,274 in taxes, which is six and half times the amount of interest paid ($143,175) to secure over $3.5 million in credit. The company can afford to secure a $23 million worth of mergers to offset money paid to taxes.
Strengths, Weaknesses, Opportunities, and Threats Analysis
A definitive parallel acquisition by Riordan Manufacturing provides an example of the ongoing consolidations in the plastic manufacturing industry. Coming after closure of Pontiac plant and launch of the Mexican plant, this acquisition provides additional evidence of growing dichotomy between aggressive management and smart investment within Riordan Manufacturing and its parent company.
Strengths
The strengths that Riordan Manufacturing could be gaining from the acquisition would be total control of the company, acquiring stock for a minimal price and reducing overall debt. There are also other factors to include with regards to the acquisition. Riordan Manufacturing could block their major competitors with this acquisition and bring in a higher net project through the acquisition. Whether the acquired firm is left independent or dissolved within Riordan's operation, the takeover can be a win-win situation.
End-to-end solutions.
Acquisition of a parallel unit will greatly augment Riordan's plastic manufacturing portfolio and allows it to offer end-to-end manufacturing and warehousing solutions.
Dominance over market share.
Acquisition can bring in a positive cash flow, untapped lines of credit, and the customer base of the acquired firm. Acquisition also provides added support to Riordan's operations and enhances Riordan's market share.
Assets control.
Riordan can control more assets for less money through the merger than if it was to acquire those assets any other way.
Weaknesses
The weaknesses in business acquisitions mostly comes from risk's taken within the merged company or through external factors. As lucrative the deal may be, facing problems are much of reality that Riordan has to encounter. A serious opposition to the merger can be the management, labor unions, the existing shareholders of the target firm, vendors, and competition.
Management and labor unions.
Management and labor unions may oppose the merger because they perceive their elimination to be inevitable. The management may act to protect their position by taking the poison pill and making the merger unviable for Riordan. The labor unions with the same notion as the management may feel that their jobs can be cut and may picket the merger, file for an antitrust lawsuit, or walk off and make the plant inoperable. Any of aforementioned situations will create a red-light for any lending company seeking to finance the deal.
Shareholders.
Shareholders of the target firm can have two perceptions: (1) they are sitting on a pile of gold and there is no reason to negotiate for what they have over what they could have; and (2) even though the company they own is facing financial setbacks; however, their return can be better through a bankruptcy liquidation or reorganization of the business.
Vendors.
Because Riordan operates in China and Mexico vendors and supplier of the target firm can see a real threat as they may get replaced by Riordan's own supplier with cheaper raw material. Subsequently, they may force the target firm to liquidate assets to repay outstanding debts; and the financial stress makes the acquisition unfeasible to finance.
Competition.
Target firm's competition as well as Riordan's competition may feel the treat that this acquisition will create larger market domination for the merged companies. As a result, other competing companies may file antitrust lawsuits or help the target firm submerge from financial stress on terms of turning down acquisition opportunities.
Opportunities
Riordan Manufacturing has an enormous opportunity to acquire another company and merge. This will provide Riordan Manufacturing with the opportunity to expand their business practices and manufacturing. By merging, Riordan Manufacturing will be able to complete more projects and acquire more clients that in turn will produce more capital for the company.
Leadership emergence.
Riordan will be able to position itself as providing a leading plastic manufacturing and warehouse solutions that include medical industry, defense industry, consumer industries, as well as hardware and high-tech industries.
Self-reliance.
Rather than relying on partners or new joint ventures for robust production and delivery, Riordan will now expands its own and thus be able to determine future product directions. Expanded operations translate to more manufacturing hours, bigger warehousing capacities, and more effective logistics system.
Tax-minimization.
Riordan can take maximum advantage of tax-breaks and reinvest its tax payments toward owning another profitable operations. Riordan pays six and a half times the amount of interest on existing liabilities to taxes; this means that with the tax incentives Riordan will gain it can invest in six other profitable entities. Typically in mergers there are two tax advantages, but Riordan has three tax advantages: (1) Riordan can use its tax reduced incentives on new projects; (2) Riordan can take advantage of target firms operation less tax-credit; and (3) reevaluation of depreciated assets at the target firm.
Threats
Riordan Manufacturing has a very big threat that comes with this acquisition and with any business merger. There is a potential that the deal could fall through or that the profits from the company will not be enough to recover. Furthermore, Riordan will need to explain why, after shutting down Pontiac Plant it is acquiring another firm in the same industry. .
Competition hostility.
Riordan's competitors can be expected to create market fear, uncertainty, and doubt about how merger effects Riordan's product line and if Riordan is going to utilize an inferior product line in favor of profitability. It would not be unexpected for plastic manufacturing competitors to aggressively target the new merged organization in many ways, direct or indirect.
Government action.
Government may see this merger as unhealthy for the target firm's consumer market, thus blocking the merger and costing Riordan time and money.
Internal factors.
The most difficult factor for the merger comes from within the Riordan family of companies. First, Riordan Manufacturing's own board and management may oppose the merger. Second, the parent company may oppose the merger. Third, employees who are uncertain of their own status with Riordan may sabotage the deal be leaking out information, bringing on rival bidder to the table for the target firm, or even worst, create an atmosphere of mistrust among workers.
In the NFL-AFL merger why did those 3 NFL teams agree to move to the AFC?
To make it even the NFL had 16 and AFL had 10 so it would make it even .
Pittsburgh agreed to move in order to maintain the rivalry with Cleveland. Cleveland agreed to move to play against Cincinnati (an AFL team) and to maintain the rivalry with Pittsburgh. Baltimore was asked to move because if the Colts were in the AFC, their games would be broadcast on NBC while the NFC Redskins would have their games broadcast on CBS. The Redskins had seniority over the Colts in the NFL and were not interested in moving to play the AFL teams.
Also each team that moved received 3 million dollars in compensation.
Potential synergy and advantages of the horizontal merger?
Economies of scale:- arise when increase in the volume of production leads to a reduction in the cost of production per unit. Economies of scale may also arise from other indivisibilities such as production facilities, management functions and management resources and systems.
Operating economies:- arise because, a combination of two or more firms may result in cost reduction due to operating economies. For example, a combined firm may eliminate duplicate channels of distribution, or create a centralized training center, or introduce an integrated planning and control system.
What are the disadvantages of a merger between Singapore and Malaysia?
refer to singapore social studies textbook primary 5b chapter3
How do you write good job description?
desribe all the senses you feel .what you smell what you feel etc
What are the steps for managing a successful merger?
Learn from the best, study Cisco Systems (CSCO). A lot has been written about them in that function. They have acquired hundreds of companies. First dedicate someone to the task of managing the merger, second make sure you understand who's corporate culture will survive. Most fail to be productive, so there are a lot of ways to do it wrong.
What is it called when to cymbals are bell to bell on the same stand?
A hi-hat is an instrument that places two smaller cymbals rim-to-rim and uses a pedal to either push them apart or put them together.
What is the scope of merger and acquisition?
Mergers & Acquisition have gained popularity throughout the world in the recent times. They have become popular due to globalization, liberalization, technological developments & intensely competitive businessenvironment. Mergers and acquisition are a big part of the corporate finance world. This process is extensively used for restructuring the business organization. In India, the concept of mergers and acquisition was initiated by the government bodies. The Indian economic reform since 1991 has opened up a whole lot of challenges both in the domestic and international spheres. The increased competition in the global market has prompted the Indian companies to go for Mergers and Acquisitions as an important strategic choice.RELATED ARTICLES
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The trends of mergers and acquisitions in India have changed over the years. The immediate effects of the mergers and acquisitions have also been diverse across the various sectors of the Indian economy. Mergers and Acquisitions (M&A) have been around for a long time and has experienced waves of popularity during these times and they are very much an important part of today's business world. They have also become increasingly international which can be due to the rising global competition. The popularity of cross-border M&A's makes it important to look at them from an international perspective
What is opportunity cost rate?
The opportunity cost rate is the rate of return you could earn on an alternative investment of similar risk.
What are the motives for a joint venture explain with an example of a joint venture?
As there are good business and accounting reasons to create a joint venture with acompany that has complementary capabilities and resources, such as distributionchannels, technology, or finance, joint ventures are becoming an increasingly commonway for companies to form strategic alliances. In a joint venture, two or more "parent"companies agree to share capital, technology, human resources, risks and rewards in aformation of a new entity under shared control. Broadly, the important reasons forforming a joint venture can be presented below:
Internal Reasons to Form a JVSpreading Costs:
You and a JV partner can share costs associated withmarketing, product development, and other expenses, reducing your financialburden.
Opening Access to Financial Resources:
Together you and a JV partner mighthave better credit or more assets to access bigger resources for loans and grantsthan you could obtain on your own.
Connection to Technological Resources:
You might want access to technological resources you couldn't afford on your own, or vice versa. Sharing innovative and proprietary technology can improve products, as well as your own understanding of technological processes.
Improving Access to New Markets:
You and a JV partner can combine customer contacts and together even form a joint product that accesses new markets.
Help Economies of Scale:
Together you and a JV partner can develop products or services that reduce total overall production expenses. Bring your product to market cheaper where the customer can enjoy the cost savings.
External Reasons to Form a JV
Develop Stronger Innovative Product:
Together you and a JV partner may be able to share ideas to develop a product that is more competitive in your industry.
Improve Speed to Market:
With shared access to financial, technological, and distribution resources, you and a JV partner can get your joint product to market faster and more efficiently.Strategic Move Against Competition: A JV may be able to better compete against another industry leader through the combination of markets, technology, and innovation.
Strategic Reasons
Synergistic Reasons:
You may find a JV partner with whom you can create synergy, which produces a greater result together than doing it on your own.
Share and Improve Technology and Skills:
Two innovative companies can share technology to improve upon each other's ideas and skills.Diversification -
There could be many diversification reasons: access to diverse markets, development of diverse products, diversify the innovative working force,
What are 3 examples of corporate mergers?
The three main types of merger are horizontal mergers which increase market share, vertical mergers which exploit existing synergies and concentric mergers which expand the product offering.
Types of mergers and acquisitions
There are a number of different types of mergers and acquisitions. However, there are some which are the most common.
- Conglomerate merger
Conglomerate Merger
These types of mergers happen between companies that have completely unrelated sets of business activities. Usually, there are two kinds of conglomerate mergers – fixed and pure. Pure mergers happen between firms which have nothing in common while fixed mergers happen between firms which are looking to expand in a particular market or product.
A live example of this can be seen in the Walt Disney and American Broadcasting Company merger.
- Horizontal merger
Horizontal Merger
This merger happens between firms that are present in the same industry. It is a consolidation where the companies operate in the same space as competitors. These acquisition types are most common in markets where there is higher competition and it would make business sense to combine two companies and become a bigger force.
An example of this can be seen in the $81 billion acquisition of Mobil by the Exxon group.
- Vertical merger
Vertical Merger
These types of business takeovers happen between companies that provide different services or raw material for one finished product. You can see it as a merger between two firms that operate at different stages in one supply chain. The most common logic between these M&A is to better the synergies and cutting the cost down in the supply chain.
An example of this can be seen in IKEA’s acquisition of the Romanian Baltic Forests.
- Market extension mergers
Market extension mergers
This type of mergers happen between two firms which deal in one product but in completely different markets. The main objective behind this merger type as you must have guessed is to ensure that the merging companies get better access to a bigger market and in turn a much larger client base.
An example of this is the 2002 acquisition of Eagle Bancshares Inc by RBC Centura Inc. – a subsidiary of the Royal Bank of Canada.
- Product extension mergers
This type of mergers happen between firms, operating in the same market, which deal in products that are related to each other. This merger enables the companies to merge their product and get direct access to a large client base, thus increasing the probability of higher revenue.
An example of this merger type can be seen in the acquisition of Mobilink Telecom Inc by Broadcom.
- Congeneric mergers
Congeneric mergers
Also known as concentric merger is a twisted version of the horizontal merger. In these acquisition types, the two firms have separate service and product lines but they serve the same industry. This alignment between these companies creates a synergy where they become a bigger firm with combined abilities.
An example of this merger type can be seen in the acquisition of E*Trade by Morgan Stanley.
- Reverse takeover
SPAC-Merger
It is one of the lesser seen mergers in the business world. Here, a private company acquires a public firm to gain an upper hand when going public. This merger type prevents them from taking the costly IPO route. This can also happen when a public company acquires a private firm.
An example of reverse takeover can be seen in the acquisition of the US Airways by the America West.
- Acqui-hire
Acqui hiring
We are living in a period where big companies are making their mark with the help of their intellectual properties and talent. Acqui-hire is a merger type where a company acquires another firm purely to get control over their talent. This type is most commonly seen in the technology industry where there is usually a shortage of good developers.
One example of this can be seen in the acquisition of Drop.io by Facebook.
So here were the eight different types of merger and acquisition most active in the business world today. We hope you must have gotten an idea of which would be the best route for your business as you look to expand.
A Contracting Specialist
What is acquisition management?
It's the Federal Aviation Administration's (FAA) own specific procurement rules. The FAA is one of the few agencies that does not use the Federal Acquisition Regulation (FAR) for procurement rules.
