This document discusses mergers and acquisitions. It outlines several reasons for mergers including economies of scale, efficiency improvements, and tax effects. It also describes different types of mergers such as horizontal, vertical, and conglomerate mergers. The document discusses methods for valuing companies including discounted cash flow valuation and comparative analyses. It provides details on payment methods for mergers including cash and stock payments. Finally, it discusses defensive strategies companies use both before and after acquisition bids.

1. MERGERS
AND
ACCQUISITION

3. SYNERGY
2+2=5

4. 1. ECONOMIES OF SCALE
2. EFFECIENCY IMPROVEMENT
3. MARKET SHARE
4. CASH RICHNESS
5. COMPLEMENTARY RESOURCES
6. TAX EFFECTS
7. UNDER VALUED ASSETS

5. 1. DIVERSIFICATION
2. UNDER VALUED SHARES
3. EARNINGS GROWTH

6. TYPES OF MERGERS
1. Horizontal merger
2. Vertical merger
3. Market-extension merger
4. Product-extension merger
5. Conglomeration
6. Reverse merger

7. 1. Asset valuation
2. Historical earnings valuation,
3. Future maintainable earnings
valuation,
4. Relative valuation (comparable
company & comparable transactions),
5. Discounted cash flow (DCF) valuation

8. 1. Cash
2. Finance
3. Hybrid

9. 1. If payment in cash
Cost = Amount paid – Value of target
company
3. If payment in shares
Cost = Post merger market value of shares
allotted – Value of the target company

10. For the target company
(a) If payment in cash
Gains = Cash received – Market value of target
company
(b) If payment in shares
Gains = Post merger market value of shares
allotted – Market value of the target company

11. For the acquirer company
= BENEFIT – COST
Where Benefit = VAB – VA – VB
Therefore, GAIN = VAB – VA – Amt paid

12. Before the bid
2. Staggered board
3. Super majority clause
4. Poison pills
5. Dual class capitalization
6. Global parachute
7. Vigil on bid prospects

13. Post offer defenses
2. Greenmail
3. Pacman defense
4. Litigation
5. Asset restructuring
6. White knight
7. Reverse bid