TAKEOVERS. MERGERS. BUYOUTS.

Successful companies by definition make a lot of money, which sooner or later has to be spent.

One possibility is to invest it all in R&D but if this is successful it eventually leads to ever greater cash returns. Another possibility is to spend the money by acquiring other companies, whether suppliers, distributors, competitors or companies in unrelated fields. A merger in business or economies refers to the combination of two companies into one larger company.

Pros and cons of takeoverdiffer from case to case but still there are a few worth mentioning. There are four arguments in favour of takeover:1)Increase in Sales/Revenues (e.g. Procter & Gamble takeover of Gillette)2)Venture into new businesses and markets3)Profitability of target company4)Increase market share.Arguments against takeover are the following:1)Reduced competition and choice for consumers in markets2)Likelihood of price increases and job cuts3)Cultural integration/conflict with new management4)Hidden liabilities of target entity

There are four types of mergers, they are following: Horizontal integration – means to merge with or take over other firms producing the same type of goods and services. Vertical integration - means joining with firms in other stages of the production or sale of a product. Backward integration – is a merger with or the acquisition of one’s suppliers. Forward integration – is a merge with or the acquisition of one’s marketing outlets. Amalgamation, Conglomerate.

A takeoverin business refers to one company (the acquirer) purchasing another (the target). Such events resemble mergers, but without the formation of a new company.

Takeovers can take place in different forms: Proxy fight– is the situation when one company tries to take control over another company’s share in a way by attracting shareholders which have voting rights.Merger and acquisitions - refers to the aspect of corporate finance strategy and management dealing with the merging and acquiring of different companies as well as other assets.Leveraged buyout – is buying of fifty plus one box using borrowed money.

Divestiture and spin-off – is selling of subsidiary, securities in order to accumulate money or to reinvest them to new projects. In this case there is a takeover bid – a public offer to a company’s shareholders to buy their shares at a particular price during a particular period, so as to acquire a company.

Also there are two forms of takeovers: A friendly takeover consists of a straight buyout of a company and happens frequently. Shareholders receive cash or an agreed-upon number of shares of the acquiring company’s stock. A hostile takeover occurs when a company attempts to buy out another whether the management of the target company likes it or not. A hostile takeover can usually occur only through publicly traded shares as it requires the acquirer to bypass the board of directors and purchase the shares from other sources. Takeover process can be described in terms of one animal hunting another. A company or individual seeking to take over another company is a predator, and the target company is a prey.

There are numerous defenses, I’d like to outline 2 main: Defenses against a hostile takeover include: the poison pill – a defensive action when company: changing the share voting structure or the board of directors, or spending all the company’s cash reserves.; a white knight - another buyer whom they prefer; green mail when bidders may agree to withdraw their bid if paid enough money for the shares they hold in the target company.

A company that wants to row or diversify can launch a raid – in other words, simply buy a large quantity of another company’s shares on the stock exchange. A “dawn raid” (нападение на рассвете) consists of buying shares through several brokers early in the morning, before the market has time to notice the rising price, and before speculators join in. Takeovers using borrowed money are called “leveraged buyouts” or “LBO” покупка контрольного пакета акций корпорации с помощью кредита. Leveraged means having a large proportion of debt compared to equity capital. Where a company is bought by its existing managers, we talk of management buyout or MBO. Asset-stripping – selling off the assets of poorly performing or under-valued companies – proved to be highly lucriative.

Date: 2015-12-17; view: 2493