Mergers and Acquisitions: Conclusion
AAA
  1. Mergers and Acquisitions: Introduction
  2. Mergers and Acquisitions: Definition
  3. Mergers and Acquisitions: Valuation Matters
  4. Mergers and Acquisitions: Doing The Deal
  5. Mergers and Acquisitions: Break Ups
  6. Mergers and Acquisitions: Why They Can Fail
  7. Mergers and Acquisitions: Conclusion
Mergers and Acquisitions: Conclusion

Mergers and Acquisitions: Conclusion


One size doesn't fit all. Many companies find that the best way to get ahead is to expand ownership boundaries through mergers and acquisitions. For others, separating the public ownership of a subsidiary or business segment offers more advantages. At least in theory, mergers create synergies and economies of scale, expanding operations and cutting costs. Investors can take comfort in the idea that a merger will deliver enhanced market power.

By contrast, de-merged companies often enjoy improved operating performance thanks to redesigned management incentives. Additional capital can fund growth organically or through acquisition. Meanwhile, investors benefit from the improved information flow from de-merged companies.

M&A comes in all shapes and sizes, and investors need to consider the complex issues involved in M&A. The most beneficial form of equity structure involves a complete analysis of the costs and benefits associated with the deals.

Let's recap what we learned in this tutorial:

  • A merger can happen when two companies decide to combine into one entity or when one company buys another. An acquisition always involves the purchase of one company by another.
  • The functions of synergy allow for the enhanced cost efficiency of a new entity made from two smaller ones - synergy is the logic behind mergers and acquisitions.
  • Acquiring companies use various methods to value their targets. Some of these methods are based on comparative ratios - such as the P/E and P/S ratios - replacement cost or discounted cash flow analysis.
  • An M&A deal can be executed by means of a cash transaction, stock-for-stock transaction or a combination of both. A transaction struck with stock is not taxable.
  • Break up or de-merger strategies can provide companies with opportunities to raise additional equity funds, unlock hidden shareholder value and sharpen management focus. De-mergers can occur by means of divestitures, carve-outs spinoffs or tracking stocks.
  • Mergers can fail for many reasons including a lack of management foresight, the inability to overcome practical challenges and loss of revenue momentum from a neglect of day-to-day operations.

  1. Mergers and Acquisitions: Introduction
  2. Mergers and Acquisitions: Definition
  3. Mergers and Acquisitions: Valuation Matters
  4. Mergers and Acquisitions: Doing The Deal
  5. Mergers and Acquisitions: Break Ups
  6. Mergers and Acquisitions: Why They Can Fail
  7. Mergers and Acquisitions: Conclusion
Mergers and Acquisitions: Conclusion
RELATED TERMS
  1. Asset Valuation Review (AVR)

    A process that establishes an estimate of the value of a failed ...
  2. Assisted Merger

    The merger of two or more financial institutions undertaken with ...
  3. Assuming Institution

    A healthy financial institution that purchases the assets of ...
  4. Acquisition

    A corporate action in which a company buys most, if not all, ...
  5. Roll-Up Merger

    A rollup (also known as a "roll up" or a "roll-up") ...
  6. Bid Wanted

    An announcement by an investor who holds a security that he or ...
  1. What are the differences between a systematic investment plan (SIP) and a recurring ...

    Differentiate between a recurring deposit and a systematic investment plan, or SIP, within an investment account, and learn ...
  2. What are the benefits and costs (or risks) of a systematic investment plan (SIP)?

    Discover the advantages and disadvantages of using a systematic investment plan; you may lower your average cost, or you ...
  3. What are the main differences between a systematic investment plan (SIP) and mutual ...

    Reduce your average cost per share on mutual fund investments using the dollar-cost averaging strategy by way of a systematic ...
  4. How do I calculate earnings per share with simple capital and complex capital structure?

    Learn the difference between simple and complex capital structures and how the structure affects a company's calculations ...
comments powered by Disqus
Related Tutorials
  1. Investing For Safety and Income Tutorial
    Bonds & Fixed Income

    Investing For Safety and Income Tutorial

  2. American Depositary Receipt Basics
    Economics

    American Depositary Receipt Basics

  3. Stock Basics Tutorial
    Investing Basics

    Stock Basics Tutorial

  4. Binary Options Tutorial
    Options & Futures

    Binary Options Tutorial

  5. Top ETFs And What They Track: A Tutorial
    Mutual Funds & ETFs

    Top ETFs And What They Track: A Tutorial

Trading Center