Mergers and Acquisitions: reasons and consequences at the international market
Résumé du mémoire
The paper deals with the issue of 'Mergers and Acquisitions' in the western market, viewing the topic from the standpoint of their failures and successes. The subject is an extremely important one at present, as, on one side, there is a trend towards major international mergers and acquisitions, and, on the other side, multiple researches indicate that more than half of the deals are failures. Having done the research on the main factors of the failures of 'Mergers and Acquisitions', it was concluded that companies fail in closing deals, as they neglect the interests of their shareholders and are often driven by their own interests and motives. While shareholders are interested in financial flows that can generate a particular target="_blank" title="Études et analyses concernant transaction">transaction, managers often overpay for the target, by mistake and sometimes even intentionally, and thus transfer wealth to the target company. Secondly, managers pay often in stock rather than in cash, communicating in such a way to shareholders indicates the company's insufficient liquidity. It has been determined the causes of failures, which affect company's shareholders. The content of the paper tells about how shareholders have an uncanny knack to react immediately to sudden changes in corporate structures, by pushing up or by pulling down the stock prices. Although, there exists numerous motives for Mergers and Acquisitions, companies must always set in advance the ultimate goal of value creation for their shareholders.
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Sommaire du mémoire
Mergers and Acquisitions: The overview
Definition of Mergers and Acquisitions
Classification of Mergers and Acquisitions
Modes of payment for Mergers and Acquisitions
Motivations behind Mergers and Acquisitions
History of Mergers and Acquisitions
Creation and destruction of value through Mergers and Acquisitions
Definition of value creation
Detailed analysis of Mergers and Acquisitions performance
Distribution of value creation in Mergers and Acquisitions
Factors of failure
Valuation of Mergers and Acquisitions
The price margins
Valuation methods
Valuation of Remedy Corporation
Extraits du mémoire
[...] In a period of 1880?1990 mergers and acquisitions took place mainly in the United States. However, after the increased globalisation started in 1993, mergers and acquisitions were practiced in all the developed countries with a large number of strong corporations and well functioning economies: the United States, Japan, United Kingdom, France, Germany, Italy, Spain, etc. The experts define five the most expressed waves of mergers and acquisitions in the United States: 1882 1903: horizontal integration. The first merger wave featured a transformation of the American economy from one of many small companies to larger, monopolistic firms dominating an industry. [...]
[...] The first wave of mergers and acquisitions came to end in 1903 with a crash of capital markets 1929: growing concentration. The second wave of mergers and acquisitions in the USA was forced by a repeated economic boom after the First World War and by structuring of new industries (electricity and automobile, in particular). This wave featured many of the same types of horizontal transactions as the first wave, but also had a good percentage of vertical transactions. While the first wave was a mergers toward monopoly period, the second wave was a mergers toward oligopoly period, since in the beginning of 20th century American Government introduced the anti-monopolistic regulation. [...]
[...] Thus, the greater is a number of potential buyers or the stronger is a competition the higher is a difference between the offer price and the seller's market price. Everyone except have shared the opinion that estimation of the target company and potential synergies is not always correct. Generally, there have been mentioned six reasons of incorrect valuation: 1). Nine of ten respondents told that the target is likely to be overestimated, because managers poorly judge their ability to realise potential synergetic effects or just overestimate these effects; 2). [...]
[...] Hopefully, the scrutiny of mergers is going to become more intense. Under rules adopted by the Financial Accounting Standards Board in 2001, companies have to explain in more detail why they are making a merger or an acquisition. They have to tell what assets, including in- tangible ones, such as goodwill and patent rights, they are getting for their money. There is a hope that in such a way acquiring companies will pay more attention to details and will not decline from the primary goal of value creation. [...]
[...] Still, as it was already shown in the precedent paragraph, in average mergers and acquisitions do not create value they fail. We will try to find reasons in the next paragraph Factors of failure This part designed to determine most frequent factors of failure is made in a form of a field research that has been carried out in three steps: defining the representative sample, gathering different opinions on the concerned problem and, finally, analyzing those results. There are numerous factors of failure, which can be found in academic literature. [...]
