Mergers and acquisitions mean the process of one business purchasing another business and blending the two together. M&As are risky and complex transactions that can affect your shareholders, productivity, and reputation. However, it is a powerful tool for accelerating growth if the proper due diligence is done. Every company and every merger is unique but no matter what industry you are involved in there are some key strategies for a successful integration.
First off, a successful merger should be built on an understanding of the key reason for the deal, the possible savings, and the assets you hope to gain. Secondly, having well-defined roles and responsibilities are important to managing the process. Last but not least is knowing the real value isn't about deal pricing, its about the integration and capturing the planned synergies of the deal.
There are many advantages and disadvantages of mergers and acquisitions and they are determined by the short and long term strategic outlook of the new and acquiring companies. Some of the factors may include market conditions, differences in business culture, acquisition costs, and changes to financial strength surrounding the corporate takeover. Let's talk about the famous M&A deal between Merrill Lynch and Bank of America that surely went sour in 2008. It was surrounded by complications ranging from employee bonuses, added debt, and forced hands. This is why in April of 2009 the U.S. Senate Committee initiated an investigation on the merger.
What are the distinctions between mergers and acquisitions? Even though they are used synonymously, Merger and Acquisition mean slightly different things. The company that purchases another company clearly establishes itself as the new owner. This is called an acquisition. Legally, the target company ceases to exist and the buyer swallows the business and the buyer's stock continues to be traded. A merger is when two firms agree to move forward as a single new company rather than remain separately owned and operated. This action would be tagged as a "merger of equals". Both of the companies stocks are surrendered and new company stock is issued. Actual mergers of equals don't happen very often. Usually, one company will purchase another, as part of the terms of the deal, the acquired firm will proclaim that the action is a merger of equals, even if it is technically an acquisition.
There are various methods of financing an M&A deal. They are differentiated partly by the way in which they are financed and partly by the relative size of the companies. Transactions paid by cash are usually termed acquisitions rather than a merger, because the shareholders of the target company are removed and the target comes under the indirect control of the bidder's shareholders. Payment by stock, are issued to the shareholders of the acquired company at a given ratio proportional to the valuation.
After all is said and done, one size doesn't fit all. Many corporations figure the best way to get ahead is to expand ownership boundaries through M&A. Although for others, separating the public ownership of a subsidiary or business segment offers more advantages. In theory, mergers create synergies, expand operations and cut costs and investors love the idea that a merger will deliver enhanced market power. However, investors need to consider the complex issues involved in M&A. The best form of equity structure must have a complete analysis of the costs and benefits associated with the deals.
Article Source: http://EzineArticles.com/?expert=Warren_Fellus
First off, a successful merger should be built on an understanding of the key reason for the deal, the possible savings, and the assets you hope to gain. Secondly, having well-defined roles and responsibilities are important to managing the process. Last but not least is knowing the real value isn't about deal pricing, its about the integration and capturing the planned synergies of the deal.
There are many advantages and disadvantages of mergers and acquisitions and they are determined by the short and long term strategic outlook of the new and acquiring companies. Some of the factors may include market conditions, differences in business culture, acquisition costs, and changes to financial strength surrounding the corporate takeover. Let's talk about the famous M&A deal between Merrill Lynch and Bank of America that surely went sour in 2008. It was surrounded by complications ranging from employee bonuses, added debt, and forced hands. This is why in April of 2009 the U.S. Senate Committee initiated an investigation on the merger.
What are the distinctions between mergers and acquisitions? Even though they are used synonymously, Merger and Acquisition mean slightly different things. The company that purchases another company clearly establishes itself as the new owner. This is called an acquisition. Legally, the target company ceases to exist and the buyer swallows the business and the buyer's stock continues to be traded. A merger is when two firms agree to move forward as a single new company rather than remain separately owned and operated. This action would be tagged as a "merger of equals". Both of the companies stocks are surrendered and new company stock is issued. Actual mergers of equals don't happen very often. Usually, one company will purchase another, as part of the terms of the deal, the acquired firm will proclaim that the action is a merger of equals, even if it is technically an acquisition.
There are various methods of financing an M&A deal. They are differentiated partly by the way in which they are financed and partly by the relative size of the companies. Transactions paid by cash are usually termed acquisitions rather than a merger, because the shareholders of the target company are removed and the target comes under the indirect control of the bidder's shareholders. Payment by stock, are issued to the shareholders of the acquired company at a given ratio proportional to the valuation.
After all is said and done, one size doesn't fit all. Many corporations figure the best way to get ahead is to expand ownership boundaries through M&A. Although for others, separating the public ownership of a subsidiary or business segment offers more advantages. In theory, mergers create synergies, expand operations and cut costs and investors love the idea that a merger will deliver enhanced market power. However, investors need to consider the complex issues involved in M&A. The best form of equity structure must have a complete analysis of the costs and benefits associated with the deals.
Article Source: http://EzineArticles.com/?expert=Warren_Fellus
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