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Mergers and Acquisitions Part 3 - Coggle Diagram
Mergers and Acquisitions Part 3
definition
mergers
combining two companies that are roughly of a similar standing,and having a friendly approach to the transaction
acquisitions
outright purchases or takeovers of another company,which can be friendly or un friendly
transaction are legally structured as mergers for tax reason,called acquisitions
sometimes it's hard to know whether to put them under mergers or acquisitions
M & As effectiveness
target company
It is usually good for the target company ’s shareholders because the acquisition company needs to pay a higher price than the market to acquire target company
acquire company
Not necessarily, the short-term stock price may fluctuate because the premium is paid too high to the target company, but in the long-term it is uncertain whether the target company can create value for the company
Reasons for M & As
good reasons
access new market,technologies
.superior acquisition & intergration capability
overcome competitive disadvantage
not-so-goodreasons
good for managers
Managers can benefit from the merger, such as the company's risk reduction
managerial hubris
Managers believe that mergers and acquisitions can expand the company's territory, and believe that it is correct
Difficulties in M & As
efficient market wall
a good company's market valuation already be high.can't really predict after adjusting for the risk weighted cost of capital
Company value is clearly reflected in stock price,and it cannot expect to make a better rate of return than the overall market on average after adjusting for risk
winner's curse
The winner of the competitive bidding must pay the highest price offered by all bidders, and may systematically pay too much