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Presenter : Naveen Raju
ID : 1115415
Topic : Justification of
Mergers & Acquisitions
Lecturer : Dr. Chan Kok Eng
Executive ReportingPresentation
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What explanations forMergers & Acquisitions
would you offer if it were found that they
rely produce Positive financial Gains fothe shareholders?
Q u e s t i o n :
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e c u t i v e S u m m a r y- More and more companies are going for
Mergers & Acquisitions for reasons likeSynergy, Reduction of Competition,Increased Market share, Economies of Scale, Improved Cost Efficiency.
- The Shareholders rarely get the FinancialGains
- Analysis say that Cash-financed Mergersare better than Stock-financed Mergers
- It is recommended that Stockholders mustbe encouraged to actively involve in the
decision-making process
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r g e r & A c q u i s i t i o n
rgers & Acquisitions Corporate strategy, corporate finamanagement dealing with the buying, selling & combininifferent companies that can aid, finance, or help a growingpany in a given industry grow rapidly without having to
ate another business entity.
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A P l u s & M i n u s e s
Advantages
Synergy
ReducedCompetition
Increased MarketShare
Resource Transfer
Economies of Scale
Disadvantages
Poor Organization Fit
Acquirer s Stock fall
Size Issue Conflicts
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Click to edit Master text stylesSecond level Third level
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Profit-5 billion US$ Profit-3.36 billion US$
Combined Profit8.36 billion US$
a l - L i f e E x a m p
l e
2005
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Click to edit Master text stylesSecond level Third level
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Combined Profit8.36 billion US$
Profit-5 billion US$ Profit-3.36 billion US$
a l - L i f e E x a m p l e
2005
2006
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Click to edit Master text stylesSecond level Third level
Fourth level Fifth level
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Combined Profit8.36 billion US$
Profit After Merger10.37 billion US$
a l - L i f e E x a m p l e
Profit-5 billion US$ Profit-3.36 billion US$
2005
2007
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A F a i l u r e A n a l y s i s
Agency Theory Corporations can function
effectively even though their managers arehighly self-interested
Protecting ShareholderInterest
Stockholders interest inGreater Returns
Managers are Self-interested & Unwillingto sacrifice them
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Agency Theory Corporations can function
effectively even though their managers arehighly self-interested
Protecting ShareholderInterest
Stockholders interest inGreater Returns
Managers are Self-interested & Unwillingto sacrifice them
A F a i l u r e A n a l y s i s
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a i l u r e A n a l y s i s
Size Issues
UnsuccessfulDiversification
Paying in Stock instead of Cash
- Mismatch between theAcquirer & the Acquiree
- Merger between companiesfrom different industrybackgrounds
- Resulting in Stock fall of the Acquirer
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a i l u r e A n a l y s i s
Poor Strategic Fit
Paying Too Much
- Incompatible Strategies of the two Organizations
- Highest bidder winsAcquiree resulting inFinancial crunch
Poor OrganizationFit
- Mismatch betweenAdministrative Practices,Cultural Practices
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t o m a k e S u c c e s s f u l M & A
Pay Sensiblyfor acquiring
the TargetCompany
Successful Merger or Acquisition
Merge with Company h
Right Industry fitCompatible StrategCulture
Ra tio of Cash to be higher than Stock to acquire
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e c o m m e n d a t i o n s
Make sure what is good forManagement is good for
Stockholders as well
Establish a Strong & IndependentBoard of Directors representing
StockholdersEncourage Stockholders to Actively
take part in Decision-makingProcess
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R e f e r e n c e
-http://www.springerlink.com/content/j06k733x25t80440/ -http://www.aims-international.org/P1.1.4.pdf -http://www.uwsp.edu/BUSINESS/CWERB/2ndQtr01/SpecialReportQt
-Organizational Behaviour 9th Edition Shermerhorn/Hunt/Osborn
http://www.springerlink.com/content/j06k733x25t80440/http://www.aims-international.org/P1.1.4.pdfhttp://www.uwsp.edu/BUSINESS/CWERB/2ndQtr01/SpecialReportQtr2_01.htmhttp://www.uwsp.edu/BUSINESS/CWERB/2ndQtr01/SpecialReportQtr2_01.htmhttp://www.aims-international.org/P1.1.4.pdfhttp://www.springerlink.com/content/j06k733x25t80440/8/7/2019 Justification of Mergers & Acquisitions
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THANKYOU