Presentation is loading. Please wait.

Presentation is loading. Please wait.

Mergers and Acquisitions BP-Amoco-ArcoBP-Amoco-Arco Exxon-MobilExxon-Mobil Time Warner-EMITime Warner-EMI National Westminster-Royal Bank of ScotlandNational.

Similar presentations


Presentation on theme: "Mergers and Acquisitions BP-Amoco-ArcoBP-Amoco-Arco Exxon-MobilExxon-Mobil Time Warner-EMITime Warner-EMI National Westminster-Royal Bank of ScotlandNational."— Presentation transcript:

1 Mergers and Acquisitions BP-Amoco-ArcoBP-Amoco-Arco Exxon-MobilExxon-Mobil Time Warner-EMITime Warner-EMI National Westminster-Royal Bank of ScotlandNational Westminster-Royal Bank of Scotland GEC-HoneywellGEC-Honeywell

2 Mergers and Acquisitions What is a merger? A+B=CWhat is a merger? A+B=C What is an acquisition (takeover)? A+B=AWhat is an acquisition (takeover)? A+B=A In economics the terms merger, acquisition and takeover are used interchangeably.In economics the terms merger, acquisition and takeover are used interchangeably.

3 Classifying Merger Activity Hostile or Friendly?Hostile or Friendly? Contested not Contested?Contested not Contested? Horizontal, Vertical or Diversifying (Conglomerate)?Horizontal, Vertical or Diversifying (Conglomerate)? Paid for by Cash, Stock or Mixture?Paid for by Cash, Stock or Mixture?

4 Motives for Merger ProfitProfit Cost savingsCost savings GrowthGrowth DiversificationDiversification Ease of entry to new market (geographic or product, home or abroad)Ease of entry to new market (geographic or product, home or abroad) Market shareMarket share

5 Who Gains? Gains to victim accrue from any appreciation in share price assuming that bid and/or final price > market price.Gains to victim accrue from any appreciation in share price assuming that bid and/or final price > market price. Gains to acquirer accrue from expected performance improvements.Gains to acquirer accrue from expected performance improvements. These are difficult to quantify - you will never know what would have happened to BP had it not acquired Amoco.These are difficult to quantify - you will never know what would have happened to BP had it not acquired Amoco.

6 Economic Measurement of the Gains Cost based - rareCost based - rare Market share studies - rareMarket share studies - rare Profitability studies - reliability of accounting data.Profitability studies - reliability of accounting data. Share price studies - time frame crucial.Share price studies - time frame crucial.

7 Outcomes and Evaluation The majority of studies show that the major beneficiaries of merger activity are the shareholders of the acquired firms.The majority of studies show that the major beneficiaries of merger activity are the shareholders of the acquired firms. This could be because managers are opportunistically pursuing growth.This could be because managers are opportunistically pursuing growth. It could also be explained by Roll’s hubris hypothesis.It could also be explained by Roll’s hubris hypothesis.

8 Mergers Prospective mergers must satisfy the relevant regulatory bodies (UK and EU in the case of the UK).Prospective mergers must satisfy the relevant regulatory bodies (UK and EU in the case of the UK). Referral often causes bidder to pull out.Referral often causes bidder to pull out. Looser forms of inter-firm collaboration exist - joint ventures and strategic alliances. Are these optimal or transitional?Looser forms of inter-firm collaboration exist - joint ventures and strategic alliances. Are these optimal or transitional?


Download ppt "Mergers and Acquisitions BP-Amoco-ArcoBP-Amoco-Arco Exxon-MobilExxon-Mobil Time Warner-EMITime Warner-EMI National Westminster-Royal Bank of ScotlandNational."

Similar presentations


Ads by Google