Executive Reporting
Presentation
Presenter : Naveen Raju
ID : 1115415
Topic : Justification of
Mergers & Acquisitions
Lecturer : Dr. Chan Kok Eng
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Question:
What explanations for
Mergers & Acquisitions
would you offer if it were found that they
arely produce Positive financial Gains for
the shareholders?
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ecutive Summary
- More and more companies are going for
Mergers & Acquisitions for reasons like
Synergy, Reduction of Competition,
Increased Market share, Economies of
Scale, Improved Cost Efficiency.
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The Shareholders rarely get the Financial
Gains
-
Analysis say that Cash-financed Mergers
are better than Stock-financed Mergers
- It is recommended that Stockholders must
be encouraged to actively involve in the
decision-making process #
rger & Acquisition
ergers & Acquisitions – Corporate strategy, corporate finan
d management dealing with the buying, selling & combining
different companies that can aid, finance, or help a growing
mpany in a given industry grow rapidly without having to
eate another business entity.
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&A Plus & Minuses
Advantages Disadvantages
Synergy Poor Organization Fit
Reduced Acquirer ‘s Stock fall
Competition
Increased Market Size Issue Conflicts
Share
Resource Transfer
Economies of Scale
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eal-Life Example
Click to edit Master text styles
to edit Master text styles
nd level Second level 2005
● Third level
hird level Combined Profit
● Fourth level
Fourth level 8.36 billion US$
● Fifth level ● Fifth level
Profit-5 billion US$ Profit-3.36 billion US$
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eal-Life Example
Click to edit Master text styles
to edit Master text styles
nd level Second level 2005
● Third level
hird level Combined Profit
● Fourth level
Fourth level 8.36 billion US$
● Fifth level ● Fifth level
Profit-5 billion US$ Profit-3.36 billion US$
2006
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eal-Life Example
Click to edit Master text styles
to edit Master text styles
nd level Second level 2005
● Third level
hird level Combined Profit
● Fourth level
Fourth level 8.36 billion US$
● Fifth level ● Fifth level
Profit-5 billion US$ Profit-3.36 billion US$
2007
Profit After Merger
10.37 billion US$
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&A Failure Analysis
Agency Theory – Corporations can function
effectively even though their managers are
highly self-interested
Protecting Shareholder
Interest
Stockholders interest in
Greater Returns
Managers are Self-
interested & Unwilling
to sacrifice them
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&A Failure Analysis
Agency Theory – Corporations can function
effectively even though their managers are
highly self-interested
Protecting Shareholder
Interest
Stockholders interest in
Greater Returns
Managers are Self-
interested & Unwilling
to sacrifice them
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ailure Analysis
Size Issues - Mismatch between the
Acquirer & the Acquiree
Unsuccessful - Merger between companies
Diversification from different industry
backgrounds
Paying in Stock - Resulting in Stock fall of
instead of Cash the Acquirer
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ailure Analysis
Poor Strategic Fit - Incompatible Strategies of
the two Organizations
Paying Too Much - Highest bidder wins
Acquiree resulting in
Financial crunch
Poor Organization - Mismatch between
Fit Administrative Practices,
Cultural Practices
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to make Successful M&A
Merge with Company ha
Pay Sensibly Right Industry fit &
for acquiring Compatible Strategy
the TargetRatio of Cash to be higher Culture
Company than Stock to acquire
Successful Merger or Acquisition
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ecommendations
Make sure what is good for
Management is good for
Stockholders as well
Establish a Strong & Independent
Board of Directors representing
Stockholders
Encourage Stockholders to Actively
take part in Decision-making
Process
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Reference
-Organizational Behaviour – 9th Edition – Shermerhorn/Hunt/Osborn
-http://www.springerlink.com/content/j06k733x25t80440/
-http://www.aims-international.org/P1.1.4.pdf
-http://www.uwsp.edu/BUSINESS/CWERB/2ndQtr01/SpecialReportQtr
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THANK
YOU
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