1.
Mergers and
acquisitions
By Xin ZHANG
Student in Master 2 Bank and
Finance

2.
AGENDA
M&A DEFINITIONS
1
COMPARISON OF M&A
2
CONSEQUENCES
3

3.
Corporate Restructure
Why restructure?
Because changing
management can
enhance firm’s value.

4.
Major forms:
Expansion: combining assets through M&A
Contraction: Breaking-up assets through divestitures
Other forms:
Changing ownership structure (LBO leverage buyout)
Retaining control through defensive strategies (poison pills etc.)
Forms of corporate restructure

5.
Number & Value of M&A Worldwide
https://imaa-institute.org/statistics-mergers-acquisitions/

6.
MERGER
DEFINITION
TYPES

7.
MERGER
A transaction where two firms agree to integrate their operations on a
relatively co-equal basis.
The bidder= acquiring company
The target company = the firm that is potentially acquired
A merger happens when two firms of about the same size agree to go
forward as a single new company rather than remain separately owned
and operated.

8.
MERGER
It’s ratified by the respective boards and approved by the majority –
usually 2/3 of shareholders from both firm.
They might change name, name may be one of the parent’s or a
combination (e.g. from “Daimler – Benz& Chrysler” to “Daimler-Chrysler”).
One of the parents usually emerges as the dominant management.

9.
Horizontal merger
between companies producing similar products,
goods and offerings similar services in different
markets
01
Vertical merger
between two companies producing different but
related goods and services in the same market
02
Conglomerate merger
between firms that are involved in totally
interrelated business activity
03
DIFFERENT TYPES OF MERGER

10.
JPMorgan Chase, its current structure, is the result of the combination of
several large U.S. banking companies over the last decade including
Chase Manhattan Bank, J.P. Morgan & Co., Bank One, Bear Stearns and
Washington Mutual.

11.
ACQUISITION
DEFINITION
TYPES

12.
Acquisition
A transaction where one firm buys another one by making the acquired firm a
subsidiary within its portfolio of business.
In other terms, acquisition is also called takeover or buyout.
In acquisition two companies are combined together to form a new one.

13.
DIFFERENT TYPES
Acquisitions are divided into” private” and “public”
Its depends on whether the acquire or target company is or is not listed
on public stock market.
PRIVATE PUBLIC

14.
In 2006, Disney exchanged 2.3 shares of its common stock for each share
of Pixar common stock, resulting in the issuance of 279 million shares of
Disney.
The acquisition purchase price was $7.4 billion in an all-stock deal. ($6,4
billion of stock and Pizar's cash and investments of $1,0 billion)

15.
DIFFERENT TYPES
1 FRIENDLY TAKEOVER
2 HOSTILE TAKEOVER
A friendly takeover involves an acquisition through negotiations between
the existing promoters and prospective investors. This kind of takeover is
resorted to further common objectives of both the parties;
A hostile takeover can happen by way of any of the following actions: if
the board rejects the offer, but the bidder continues to pursue it or the
bidder makes the offer without informing the board beforehand.

16.
TAKEOVER AND DEFENSES
The company being bid can use a number of
defensive tactics including:
1. Persuasion by management that the offer
isn’t in their best interests
2. Taking legal actions
3. Increasing the cash dividend
4. As a last resort, looking for a “friendly”
company (e.g. White Knight) to purchase
them.

17.
APPLE & BEATS
Apple's $3 billion purchase of Beats in may 2014
This acquisition made Beats co-founder Dr Dre the
first hip-hop billionaire.

18.
In February 2014 Facebook announced the firm's biggest acquisition ever.
In October 2014, Facebook finally closes $19 Billion WhatsApp Deal.
This acquisition was the sixth biggest in technologies and biggest ever in
history of acquisitions of software companies.
FACEBOOK & WHATSAPP

19.
2. COMPARISON

20.
company A+ company B= Company C
company A + company B= Company A
The words are often used interchangeably even though
they mean something very different, but “merger”
sounds more amicable and less threatening.

21.
MERGER ACQUISITIONS
1. Merging of two organization in to one.
It's the mutual decision
2. Merger is more expensive than
acquisition (high legal cost)
3. It's time consuming and the company
has to maintain so much legal issues
4. Through merger shareholders can
increase their net worth
5. Dilution of ownership occurs in merger
1. It can be friendly takeover or hostile
takeover
2. Less expensive than merger
3. It's faster and easier transaction
4. Buyers cannot raise their enough
capital
5. The acquirer does not experience the
dilution of ownership

22.
3. CONSEQUENCES

23.
IMPACT OF M&A

24.
VALUE CREATION FOR M&A’s
 Revenue enhancement
 Marketing gains
 Strategic benefits
 Operating synergies
 Economies of scale (spreading cost across
more units)
 Economies of scope (reduce costs for
supplier and customers)
 Complementary strengths
 Efficiency increases
 New management team might be more
efficient
 Make use of unused production/ sales/
marketing channel capacity
 Tax benefits
 The use of unused debt capacity
 The use of surplus funds

25.
1
5
4
Overly diversified
Inability to achieve
synergy
Large extraordinary
debts
3
2
Cultures differences
Inadequate
evolution of target
problems
M&A implementation issues

26.
Daimler Chrysler Merger
A cultural Mismatch
Daimler-Benz and Chrysler
Corporation, two of the world’s
leading car manufacturers,
agreed to combine their
businesses in 1998.
Chrysler reported a third quarter
loss of $ 512 million for the
period ending September 30,
2000.
Its share value slipped below 40
form 108 in January 1999

27.
70% of all mergers
and acquisitions
that take place
between firms form
different countries
turns out to be a
failure.

28.
M&A activity is risky, it has both positive and negative impacts. When an
company acquire or merge, it depends on its strategies whether they will
profit or loss
CONCLUSION

29.
THANKS