1) merger is the combination of two or more firms through direct acquisition of assets by one of other or others.
2) Merger could be horizontal or vertical or conglomerate.
3) Horizontal merger is the combination of two or -+more firms in th-+e same stage of production / distribution / area of business.
4) Vertical integration is combination of two or more firms involved in different stages of production or distribution.
5) Conglomerate merger is the combination of firms -+engaged in unrelated lines of business.
6) Acquisition or takeover means a combination in which the acquiring company acquires all or part of assets shares of the target company.
7) In acquisitions there exists willingness of the management of the target company to be acquired while this may not be so under takeover.
8) A merger results into an economics advantages when the combined firms are worth together than as separate entities. Merger benefits may results from economies of scale, economies of vertical integration, increased efficiency tax shields or shared resources.
Merger should be undertaken when the acquiring company s gain exceeds the cost. Cost is the premium that the buyer acquiring company pays for the selling company target company} over its value as a separate entity. Discounted cash flow technique can be used to determine the value of the target company to the acquiring company. However the mechanics of buying a company is very complex than those of buying an equipment or machine. Integrating an acquired company successfully to the buying company operation is quite difficult and challenging task.
In a leveraged buy out (LBO) a company is brought by raising most funds through borrowings. When its own managers buy out the company, it is called management buy out (MBO). After acquisition the LBO generates lot of profit and creates high value. Lenders get high return by converting their loans into equity or using warrants buying the company shares.
Merger and acquisition activities are regulated under various laws in India. The objectives of the laws as well as the stock exchange requirements are to make merger deals trans parent and protect the interest of all shareholders. The assets and liabilities of the post merger firm can be combined later using either the pooling of interest method or the purchase method. In the pooling of interest method assets and liabilities are combined at book values. In the purchase method, the assets and liabilities are revalued and then combined. The difference between book values of assets and liabilities and their revaluation is shown as good will or capital reserve.
2) Merger could be horizontal or vertical or conglomerate.
3) Horizontal merger is the combination of two or -+more firms in th-+e same stage of production / distribution / area of business.
4) Vertical integration is combination of two or more firms involved in different stages of production or distribution.
5) Conglomerate merger is the combination of firms -+engaged in unrelated lines of business.
6) Acquisition or takeover means a combination in which the acquiring company acquires all or part of assets shares of the target company.
7) In acquisitions there exists willingness of the management of the target company to be acquired while this may not be so under takeover.
8) A merger results into an economics advantages when the combined firms are worth together than as separate entities. Merger benefits may results from economies of scale, economies of vertical integration, increased efficiency tax shields or shared resources.
Merger should be undertaken when the acquiring company s gain exceeds the cost. Cost is the premium that the buyer acquiring company pays for the selling company target company} over its value as a separate entity. Discounted cash flow technique can be used to determine the value of the target company to the acquiring company. However the mechanics of buying a company is very complex than those of buying an equipment or machine. Integrating an acquired company successfully to the buying company operation is quite difficult and challenging task.
In a leveraged buy out (LBO) a company is brought by raising most funds through borrowings. When its own managers buy out the company, it is called management buy out (MBO). After acquisition the LBO generates lot of profit and creates high value. Lenders get high return by converting their loans into equity or using warrants buying the company shares.
Merger and acquisition activities are regulated under various laws in India. The objectives of the laws as well as the stock exchange requirements are to make merger deals trans parent and protect the interest of all shareholders. The assets and liabilities of the post merger firm can be combined later using either the pooling of interest method or the purchase method. In the pooling of interest method assets and liabilities are combined at book values. In the purchase method, the assets and liabilities are revalued and then combined. The difference between book values of assets and liabilities and their revaluation is shown as good will or capital reserve.