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M&As (Typical things that can go wrong and how to avoid failure (:red…
M&As
Types
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:red_flag:Conglomerates - large corporation formed by merging of separate and diverse firms whose activities are unrelated to the corporation's primary activities
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:red_flag:Alliances - union/association for mutual benefit, between countries or organizations
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Other types
:red_flag:Vertical - Firms are on other stages of the production or sale of a product (sometimes different)
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:red_flag:Horizontal - fewer firms compete. Economies of scale. Producing the same type of product or service
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Poison pills
Poison pill – a strategy, designed to produce negative effects against a takeover. A poison pill is a tactic utilized by companies to prevent or discourage hostile takeovers. A company targeted for a takeover uses a poison pill strategy to make shares of the company's stock unfavorable to the acquiring firm.
A “flip-in” permits shareholders, except for the acquirer, to purchase additional shares at a discount. This provides investors with instantaneous profits. Using this type of poison pill also dilutes shares held by the acquiring company, making the takeover attempt more expensive and more difficult. This right to purchase is given before the takeover or acquisition is finalized, and will often be triggered when the acquirer surpasses a certain ownership percentage threshold.
A “flip-over” enables stockholders to purchase the acquirer’s shares after the merger at a discounted rate. For example, a shareholder may gain the right to buy the stock of its acquirer, in subsequent mergers, at a two-for-one rate.
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