Motivation For Merger Or Consolidation Finance Essay - Free Essay Example

Sample details Pages: 4 Words: 1311 Downloads: 4 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? The most used word in MA is synergy, which is the idea that by combining business activities, performance will increase and costs will decrease. Essentially, a business will attempt to merge with another business that has complementary strengths and weaknesses. 2. Don’t waste time! Our writers will create an original "Motivation For Merger Or Consolidation Finance Essay" essay for you Create order Diversification / Sharpening Business Focus: These two conflicting goals have been used to describe thousands of MA transactions. A company that merges to diversify may acquire another company in a seemingly unrelated industry in order to reduce the impact of a particular industrys performance on its profitability. Companies seeking to sharpen focus often merge with companies that have deeper market penetration in a key area of operations. 3. Growth: Mergers can give the acquiring company an opportunity to grow market share without having to really earn it by doing the work themselves instead, they buy a competitors business for a price. Usually, these are called horizontal mergers. For example, a beer company may choose to buy out a smaller competing brewery, enabling the smaller company to make more beer and sell more to its brand-loyal customers. 4. Increase Supply-Chain Pricing Power: By buying out one of its suppliers or one of the distributors, a business can eliminate a level of costs. If a company buys out one of its suppliers, it is able to save on the margins that the supplier was previously adding to its costs; this is known as a vertical merger. If a company buys out a distributor, it may be able to ship its products at a lower cost. 5. Eliminate Competition: Many MA deals allow the acquirer to eliminate future competition and gain a larger market share in its products market. The downside of this is that a large premium is usually required to convince the target companys shareholders to accept the offer. It is not uncommon for the acquiring companys shareholders to sell their shares and push the price lower in response to the company paying too much for the target company. 2. Types of merge and acquisition a. Statutory merger: A merger in which one of the merging companies continues to exist as a legal entity, rather than being replaced by the new entity.opposite of statutory consolidation. b. Statutory consolidation: A merger in which a new corporate entity is created from the two merging companies, which cease to exist.opposite of a statutory merger. c. Stock acquisition An acquisition by one company of another in which the acquiring company buys the target companys stock. That is, rather than paying with debt or some other means, an acquisition of stock occurs when the acquiring company buys a majority of the target companys shares outstanding. This may be associated with a hostile takeover, where the acquiring company buys shares directly from stockholders, but this is not always the case. See also: Leveraged buyout. d. Asset acquisition: A buyout strategy in which key assets of the target company are purchased, rather than its shares. This is particularly popular in the case of bankrupt companies, who might otherwise have valuable assets which could be of use to other companies, but whose financing situation makes the company unattractive for buyers (an asset acquisition strategy may be pursued in almost any case where the potential target company has an unattractive financing structure). Further, the asset acquisition strategy might be pursued if the acquirer is interested in certain specific assets, and not all the possible target assets. 3. Benefits of Mergers and Acquisitions The benefits are the main reasons for which the companies enter into these deals. Mergers and Acquisitions may generate tax gains, can increase revenue and can reduce the cost of capital. The main benefits of Mergers and Acquisitions are the following: Greater Value Generation Mergers and acquisitions often lead to an increased value generation for the company. It is expected that the shareholder value of a firm after mergers or acquisitions would be greater than the sum of the shareholder values of the parent companies. Mergers and acquisitions generally succeed in generating cost efficiency through the implementation of economies of scale. Merger Acquisition also leads to tax gains and can even lead to a revenue enhancement through market share gain. Companies go for Mergers and Acquisition from the idea that, the joint company will be able to generate more value than the separate firms. When a company buys out another, it expects that the newly generated shareholder value will be higher than the value of the sum of the shares of the two separate companies. Mergers and Acquisitions It can prove to be really beneficial to the companies when they are weathering through the tough times. If the company which is suffering from various problems in the market and is not able to overcome the difficulties, it can go for an acquisition deal. If a company, which has a strong market presence, buys out the weak firm, then a more competitive and cost efficient company can be generated. Here, the target company benefits as it gets out of the difficult situation and after being acquired by the large firm, the joint company accumulates larger market share. This is because of these benefits that the small and less powerful firms agree to be acquired by the large firms. Gaining Cost Efficiency When two companies come together by merger or acquisition, the joint company benefits in terms of cost efficiency. A merger or acquisition is able to create economies of scale which in turn generates cost efficiency. As the two firms form a new and bigger company, the production is done on a much larger scale and when the output production increases, there are strong chances that the cost of production per unit of output gets reduced. An increase in cost efficiency is affected through the procedure of mergers and acquisitions. This is because mergers and acquisitions lead to economies of scale. This in turn promotes cost efficiency. As the parent firms amalgamate to form a bigger new firm the scale of operations of the new firm increases. As output production rises there are chances that the cost per unit of production will come down 4. Difference Between Merger and Acquisition Although merger and acquisition are often used as synonymous terms, there is a subtle difference between the two concepts. In the case of a merger, two firms together form a new company. After the merger, the separately owned companies become jointly owned and obtain a new single identity. When two firms merge, stocks of both are surrendered and new stocks in the name of new company are issued. Generally, mergers take place between two companies of more or less same size. In these cases, the process is called Merger of Equals. However, with acquisition, one firm takes over another and establishes its power as the single owner. Generally, the firm which takes over is the bigger and stronger one. The relatively less powerful, smaller firm loses its existence, and the firm taking over, runs the whole business with its own identity. Unlike the merger, stocks of the acquired firm are not surrendered, but bought by the public prior to the acquisition, and continue to be traded in t he stock market. Another difference is, when a deal is made between two companies in friendly terms, it is typically proclaimed as a merger, regardless of whether it is a buy out. In an unfriendly deal, where the stronger firm swallows the target firm, even when the target company is not willing to be purchased, then the process is labeled as acquisition. Often mergers and acquisitions become synonymous, because, in many cases, a bigger firm may buy out a relatively less powerful one and compel it to announce the process as a merger. Although, in reality an acquisition takes place, the firms declare it as a merger to avoid any negative impression. Statutory merger, statutory consolidation, stock acquisition Asset acquisition GongCheng

Essay on Finance - 1489 Words

Corporate Finance: Theory Practice 25557 Assignment 1) What are the appropriate costs of capital for the GPS transmitter and surveillance aircraft projects? The cost of capital is used to discount the expected cash flow of a proposed project to its present value to make an evaluation of whether to proceed or drop out the project. Normally, a company cost of capital or WACC is used as the discount rate for projects. However, as WACC represents the average rate of return demanded by investors in the companys debt and equity securities, it is only a suitable discount rate for projects that have same risk as the companys existing business. Some companies use the WACC as a starting point or benchmark then add or subtract for riskier or†¦show more content†¦We assume they have similar characteristics. ÃŽ ²A = (D/D+E)* ÃŽ ²D + (E/D+E)* ÃŽ ²E ÃŽ ²E = 1.666 (D/D+E) = debt to total capital ratio = 40% Equity to total capital ratio = 1 - (D/D+E) = (E/D+E) = 60% We know ÃŽ ²D = 0 , therefore (D/D+E)* ÃŽ ²D = 0 Therefore: ÃŽ ²A = (E/D+E)* ÃŽ ²E = 0.6 * 1.666 = 0.9996 Rproject = rf + ÃŽ ²A (rm - rf) rf = 4% (Government spot rate) = 0.04 + 0.9996 (0.05) rm - rf = 5% (market risk premium from case) Rproject = 0.08998 Rogers believe the industry for the GPS transmitter is very risky as it is based on the business cycle, therefore it is decided a 3% is added to the cost of capital for additional project risk. Also it is HMTs company policy to add issuance cost to cost of capital. The new equity capital is raised from retained earnings and the equity issuance cost for HMT is 5%. As such, the appropriate cost of capital for the GPS transmitter project isShow MoreRelatedFinance1352 Words   |  6 Pagesfinancial manager differ from the traditional financial manager? 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Notes from Doran Free Essays

How did concerns to keep Catholics happy Influence Elizabethan religious settlement? For both personal and political reasons Elizabeth was anxious to retain certain Catholic ceremonial traditions within her Church. Personally, she disliked the idea of a married clergy, she loved elaborate Church music and refused to accept that all images were idolatrous. Equally, she was aware that she had to persuade Spain that her Church was little different, externally, to theirs. We will write a custom essay sample on Notes from Doran or any similar topic only for you Order Now At the same time, she had to persuade the Lutheran that she was a follower of their Suburb Confession. Therefore, outward Catholic signs such as the use of vestments, crosses and candlesticks would serve to reassure both Lutheran and Catholics. How widespread does Doran say Catholicism was up to 1 580? When Elizabeth came to the throne, the ma]royalty of people In England and Wales were Catholic in belief. By 1 559 only 14% of wills in Sussex contained Protestant formulae and bequests; by 1560 only 10% of wills in Kent had a statement of Protestantism in the preamble. Therefore, Elizabethan task was to slowly wean the population away from their traditional Catholic beliefs and towards her protestant gem through preaching and education. The government was actually particularly successful in this, reducing Catholicism to a mere household religion with only 1-2% of the population supporting it. Some say this was down to the gentry and clerical leadership’s failure to mount any resistance to Elizabethan Religious Settlement, thus allowing ordinary laity to drift into conformity. When the parish priest was ready to use the Book of Common Prayer and the squire publicly appeared at the new services, it was hardly surprising the ordinary people followed the examples of their social superiors† Patrick McGrath The Catholic Church did not simply give in without a struggle when Elizabeth came to the throne. The Clerical leadership made an early start against Elizabethan settlement – the bishops’ fought against the 1559 legislation I n the House of Lords as well as the refusal of all but one of the Marina episcopate to take the Oath of Supremacy. Many of the Catholic Intelligentsia also refused to conform to the new Protestant Church – about 100 fellows and other senior members left the university of Oxford between 1559 – 1566. Corner of these went into exile, some went to the Catholic university of Alluvial publishing 40+ books and pamphlets between 1564- 1568. By 1564 Lavational attacks on the Elizabethan Church scared Elizabeth, and by 1 566 the Queen was so concerned about illegal foreign books entering the country, that she asked for all boats to be searched. What reasons does Doran give for Increasing perceived threat of Catholicism In the 1 5705? OFF England and abroad. The deteriorating relationship with Spain after 1568 and Mary Stuart flight to England in the same year to seek refuge led to many Catholic plots for uprising and rebellion supported by Spanish military power. The 1566 election of Pope Pips V, who referred to Elizabeth as one Who pretended to be Queen of England’, raised anxieties o ver whether he would send a crusade. Finally, in 1569 the Northern Rebellion broke out which vindicated fears of a Catholic threat; this was followed by the Bull of Excommunication in 1570 and the Riddled Plot in 1571. In 1572 the massacre of French Hugeness on SST. Bartholomew Day scared people that there was an international plot to wipe out Protestantism. How much a threat were Catholics in reality? Not huge, it has been exaggerated slightly. The people of England were mostly loyal to the Queen and Country, they simply hoped for better times under Mary. The Northern Rebellion was largely contained in the Northern counties of Durham, Northumberland, Wasteland and York. John Leslie and Nicholas Sanders were the only two polemicists to write books expressing political opposition. Equally, the government put more pressure on the Catholics which weakened their threat considerably: more enquiries were held into recusant, the Privy Council ordered new groups of people to subscribe to the Prayer Book and supremacy; ewers at the Inns of Court were questioned about their attendance at communion and many bishops took firmer action against recusant; Catholics were usually fined; some lawyers expelled from their Inns at Courts and some lost their position on the bench of magistrates. How loyal were Catholics in the 1 sass? Even though during the sass an intense persecution of their religion took place, Catholics were mostly loyal to Queen Elizabeth. The vast majority of people simply waited for better times ahead when Mary, Queen of Scots was to take to the throne or when they might be granted tolerance under Protestantism. Very few people plotted against Elizabeth or her government. Most people passively accepted laws for recusant and accepted those enforcing penal laws. There were several statements and petitions addressed to the Queen by prominent Catholics expressing their loyalty and not all were under duress. In fact, in 1585 Catholic nobles and gentry led by Thomas Howard, Duke of Norfolk presented Elizabeth with a petition stating their complete loyalty. Even after a call for the restoration of Catholicism by force from William Allen and Robert Parsons, there was very little Catholic support. How to cite Notes from Doran, Papers