Mergers and Takeovers

Mergers &

Takeovers

Involves one business acquiring control of another business.

A business combination that occurs when one company buys most or all of another company's shares.

A business deal where two existing, independent companies combine to form a new, singular legal entity.

tAKEOVER

Aquisition

Merger

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Reasons for mergers and takeovers

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Learning objectives:

Ability to define and distinguish between a merger and a takeover.

Analyse the benefits and risks of mergers and takeovers.

Identify key motivations for mergers and takeovers.

Reasons for Mergers & Takeovers

01

Integration in the form of mergers or takeovers results in rapid business growth and is referred to as inorganic growth.

Introduction...

Firms will often grow organically to the point where they are in a financial position to integrate with other firms.

Video

Whilst watching the video write down at least 3 bullet points.

3.Synergies

2.Economies of scale

1.Strategic fit

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There are several reasons why companies may choose to pursue mergers and takeovers:

5.Shareholder value

4.Elimination of competition

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2 more reasons why companies choose to pursue mergers and takeovers:

The acquiring company buys a controlling stake in the target company's shares (>50%) and gains control of its operations

Occurs when one company purchases another company, often against its will.

A takeover:

The original companies cease to exist and their assets and liabilities are transferred to the newly created entity.

What is the difference between a merger and a takeover?

A merger:

Occurs when two or more companies combine to form a new company

Identify which type of integration was used in examples.

Learning objectives:

Ability to distinguish between vertical and horizontal integration.

Identify reasons why a business uses a specific inte gration type.

Types of Integration

02

3.Horizontal

2.Vertical backward

1.Vertical forward

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There are several types of integration which businesses may use:

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INTERACTIVE QUESTION

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CONCLUSION

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Task... Research into a merger or takeover between two firms:

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Synergies

Synergies are the benefits that result from the combination of two or more companies, such as increased revenue, cost savings, or improved product offerings

Strategic fit

A company may acquire another company to expand into new markets!

• Diversify its product offerings
• Gaining access to new technology

Example: In 2010 Kraft Foods purchased Cadbury's to increase its product offering and expand business sales in the United Kingdom

Economies of scale

Growth creates economies of scale by allowing companies to reduce costs and increase efficiency through the consolidation of operations(combinations of two different economies of scale).

Definition

Growth that is driven by internal expansion using reinvested profits or loans.

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Strategic fit

Use this space to add some cool interactivity. Include text, images, videos, tables, PDFs… even interactive questions! Premium tip: Get information on how your audience interacts:

• Visit the Activity preferences
• Enable user tracking
• Let the communication flow!

Do you have an idea?

Use this space to add some great interactivity. Include text, images, videos, tables, PDFs… even interactive questions! Premium tip: Get insights on how your audience interacts:

• Visit the Activity preferences
• Enable user tracking
• Let communication flow!

Elimination of competition

Takeovers are often used to eliminate competition and the acquiring company increases its market share. Example: Meta, the parent company of Facebook, purchased WhatsApp in 2014 and continued to run the messaging service alongside their own Facebook Messenger

Shareholders value

Mergers and takeovers can also be used to create value for shareholders. By combining companies, shareholders can benefit from increased profits, dividends and stock prices