THUONG MAI UNIVERSITY

DEPARTMENT BUSINESS ADMINISTRATION

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Topic: Merge and Acquisition

GROUP: 9
CLASS: 241_ENTI1011_03
LECTURER: Ms. Nguyen Quynh Mai

Ha Noi – 2024
 Name Task Mark
1 Le Hoang Truc 1,2,3
2 Mai Duc Tuan Leader
3 Ha Van Tung 4,5
4 Nguyen Khanh Van Powerpoint
5 Pham Tien Viet Powerpoint
6 Hoang Thi Ha Vy Word
 MEETING MINUTES
I. Members
1. Le Hoang Truc
2. Mai Duc Tuan
3. Ha Van Tung
4. Nguyen Khanh Van
5. Pham Tien Viet
6. Hoang Thi Ha Vy
II. Time, date and place
- Time: 21h00 -21h20
- Date: 01/10/2024
- Place: Google meet
III. Content discussing
- Discuss and choose the topic for the presentation
- Divide the tasks among members of the group.
- Choose a day to complete and send to the leader.

Head of the team

Tuan

Mai Duc Tuan

 Mục lục

1. Introduction..............................................................................................................1

1.1. Definition of M&A.............................................................................................1

1.2. Difference between mergers and acquisitions.................................................1

1.3. Importance of M&A..........................................................................................2

2. Key Motivations for M&A.......................................................................................2

2.1. Growth and Expansion......................................................................................2

2.2.Synergy.................................................................................................................3

2.3. Market Share and Competition........................................................................3

2.4. Tax Benefits........................................................................................................3

3. M&A Process............................................................................................................4

3.1. The pre-M&A phase..........................................................................................4

3.2. Negotiation and Deal Structuring.....................................................................4

3.3. Post-M&A Integration.......................................................................................4

4. Case Study of Successful/Unsuccessful M&A........................................................5

4.1. Successful Example: Facebook Acquiring Instagram (2012).........................5

4.2. Unsuccessful Example: AOL and Time Warner Merger (2000)...................5

5. Conclusion.................................................................................................................6

5.1. Summary.............................................................................................................6

5.2. Final Thought:....................................................................................................6

1. Introduction
1.1. Definition of M&A:
M&A is the abbreviation of the English phrases Mergers and Acquisitions. M&A
is the activity of gaining control over a business through a merger or acquisition
between two or more businesses to own part or all of that business.
M&A includes two completely different actions: Mergers and acquisitions.
Specifically:
- M (Mergers) or merger: is a form of association between businesses usually of
the same scale to create a new business. The merged company transfers all
assets, rights, obligations and legal interests to the merging company, and at the
same time terminates the existence of the merged company to become a new
company. These organizations may be competitors, or have the same suppliers
and customers.
- A (Acquisitions) or acquisition: is a form of combination in which large
businesses will buy smaller and weaker businesses. These acquired businesses
will still retain their old legal status and the acquiring business will have
ownership rights. legal ownership of the business you just purchased.
Acquisition activities are often carried out by large-scale companies to acquire
small businesses and gain control of them.

1.2. Difference between mergers and acquisitions.

The term M&A is considered a popular term in the market today, but in essence,
business mergers and acquisitions still have clear differences:
- A company acquires another company and puts itself in a position of new
ownership, the transaction is called an acquisition and does not involve the
appearance of a new company. The purpose of buying is to focus on
immediate, rapid growth.
- The term merger refers to when two or more businesses of the same size agree
to merge into a new company instead of operating and owning separately. The
aim is to reduce competition between companies and undergo mergers.

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 - Two companies of the same nature and size will enter into a merger, unlike an
acquisition, in which the larger company will overwhelm the smaller company.
- In a merger, the minimum number of participating companies is three, but in an
acquisition, the minimum number of participating companies is two.
- A merger requires more legal procedures than an acquisition.
However, in reality, there are some cases where a purchase and sale deal can also
be considered a merger when both parties agree to join together for a common benefit.
1.3. Importance of M&A:
M&A (Mergers and Acquisitions) is an important part of the business world
because it helps companies expand, improve operational efficiency and increase value
quickly compared to traditional methods such as the development of internal
Main reasons:
- Growth: M&A helps companies expand rapidly by acquiring other businesses
that already have market share, customer base and valuable assets.
- Synergistic efficiency: Businesses can achieve synergistic benefits by
combining resources, experience and technology, thereby reducing costs,
increasing productivity or improving management efficiency.
- Market share: M&A can help businesses increase market share immediately by
eliminating competitors or entering new markets, thereby strengthening their
position in the industry.

2. Key Motivations for M&A

2.1. Growth and Expansion
M&A is a quick and effective way for businesses to achieve growth without the
time and cost of building from scratch. By acquiring other companies, businesses can:
- Enter New Markets: Acquiring a local company or a well-performing partner in
the target market allows businesses to access new customers and territories
quickly.
- Enhance Customer Base: When a company merges with or acquires another, it
can gain the entire existing customer ecosystem of the partner, thereby
expanding its business scale.

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 - Diversify Products: M&A also provides an opportunity to add new products or
services, reducing dependence on a single sector or product and increasing
competitiveness.
2.2.Synergy
One of the core benefits of M&A is the creation of synergy, meaning that the value
of the combined business is greater than the sum of each company operating
independently. There are two main types of synergy:
- Cost Synergy: When two businesses merge, they can reduce costs by
consolidating operations, eliminating redundant departments or functions, and
optimizing production and supply processes.
- Revenue Synergy: Businesses can increase revenue by expanding market reach,
better leveraging the existing customer base, or combining brand strengths to
create new products or services that attract the market.
2.3. Market Share and Competition
M&A allows businesses to quickly expand market share and strengthen their
competitive position:
- Eliminating Competition: Acquiring potential or current competitors helps
businesses enhance their strength and limit the number of rivals in the same
field.
- Enhancing Market Dominance: When a business achieves dominance in scale,
market share, and influence, it gains greater leverage in controlling prices,
supply, and negotiating with partners.
2.4. Tax Benefits
M&A is sometimes used as a strategy to optimize taxes:
- Reducing Tax Liability: Some companies may benefit from favorable tax
structures when merging, especially if one of the parties involved has a lower
tax rate or specific tax incentives.
- Optimizing Debt and Asset Management: Through M&A, companies can
rearrange their financial structures more favorably, helping to minimize debt
obligations or improve cash flow.

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3. M&A Process
3.1. The pre-M&A phase
Target identification and evaluation, along with due diligence. In the initial step,
businesses need to establish criteria for finding M&A targets, including growth
potential, assessing the target company's ability to grow, and strategic fit to consider
how the target long-term strategic support. In addition, it is necessary to analyze the
target company's assets and capabilities to determine the added value from the
acquisition.
The next step is appraisal, an important step that helps make a detailed assessment
of the target company. This includes checking the financial situation through financial
statements and other key indicators to ensure feasibility. At the same time, it is
necessary to consider legal obligations and risks, as well as evaluate corporate culture
to determine compatibility, affecting the future integration process.
3.2. Negotiation and Deal Structuring
Negotiation and Deal Structuring is a crucial stage in the M&A process, where the
parties negotiate essential terms. First, they need to determine the share price, which
involves accurately valuing the target company, potentially using methods such as
discounted cash flow (DCF) or comparisons with similar companies. Next, they must
agree on the payment method, determining how the payment will be executed,
whether in cash, stock, or a combination of both. Finally, the parties will negotiate the
binding terms and conditions, including commitments from the seller and entitlements
of the buyer, to ensure clarity on the rights and obligations within the transaction.
3.3. Post-M&A Integration
Post-M&A Integration is a crucial yet challenging phase where the merging of
two companies can encounter difficulties. One of the biggest challenges is corporate
culture, as integrating two different cultures can create conflicts, requiring a strategy
to manage this transition effectively. Additionally, integrating processes and systems
is necessary to ensure that workflows and technologies operate efficiently. The
company also needs to rearrange employee roles within the new organization and
address any concerns they may have.

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 Furthermore, managing stakeholder expectations is essential. The company needs
a clear communication plan to inform employees, shareholders, and customers about
the M&A process and its benefits. Establishing goals and success criteria for the
integration process is also important to track progress and ensure desired outcomes,
ultimately facilitating a smoother integration process.

4. Case Study of Successful/Unsuccessful M&A

4.1 . Successful Example: Facebook Acquiring Instagram (2012)

In 2012, Facebook made a bold move by acquiring Instagram for approximately

$1 billion. This acquisition raised eyebrows at the time, as it seemed ambitious for
Facebook to invest such a large sum in a company that had only 13 employees and no
established revenue stream. However, Instagram had already carved out a niche as a
fast-growing social media platform, attracting a substantial user base, particularly
among younger demographics, who were drawn to its mobile-first experience and
focus on visual content. Despite its size, Instagram’s appeal was strong, and Facebook
saw an opportunity to expand its influence in the social media space.

The acquisition of Instagram proved highly successful, resulting in substantial

user growth for both Instagram and its parent company. When Facebook acquired
Instagram, the platform had around 30 million users. By 2024, that number had surged
to over 2 billion monthly active users, making Instagram one of the most influential
social media platforms worldwide. Facebook also benefited, as Instagram's integration
into the Meta ecosystem (formerly Facebook, Inc.) played a significant role in
attracting new users and retaining existing ones, with Facebook itself reaching over 3
billion monthly active users by 2024.

Instagram has become a major driver of advertising revenue for Meta,

contributing an estimated 40-50% of the company’s total ad revenue by 2024. The
platform’s popularity among younger, engaged users made it an attractive space for
advertisers. Meta has successfully leveraged Instagram’s platform to introduce various
advertising features, such as ads in Stories, Reels, and Instagram Shopping. These
innovations have allowed Meta to diversify its ad offerings, attracting a wide range of

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advertisers, from small businesses to large global brands, further strengthening Meta’s
overall financial performance.

The success of the Instagram acquisition has also had a positive impact on Meta’s
market capitalization. In 2012, Meta was valued at around $100 billion, but by 2024,
its market cap had exceeded $1 trillion. Instagram has been a key contributor to this
growth, thanks to its sustained popularity and revenue-generating capacity, which has
bolstered investor confidence in Meta’s long-term prospects. This growth has
reinforced Meta’s competitive position, particularly against emerging social media
rivals such as Snapchat and TikTok. By incorporating features similar to those of its
competitors—like Stories from Snapchat and Reels from TikTok—Instagram has
managed to retain user engagement and minimize the threat posed by these platforms.

The acquisition has also strengthened Meta’s broader ecosystem, facilitating

cross-platform connectivity among its services, including Messenger, WhatsApp, and
Facebook Marketplace. This interconnected ecosystem enhances the overall user
experience by providing a seamless flow between services, which increases user
retention and encourages the adoption of multiple Meta platforms. By owning
Instagram, Meta has created a unified and cohesive user experience across its
applications, deepening user engagement and cementing its position as a leader in the
social media landscape.

In summary, Facebook’s acquisition of Instagram is widely regarded as one of the

most successful tech acquisitions in recent history. This acquisition has not only
facilitated immense user growth and boosted advertising revenue but has also allowed
Meta to enhance its competitive positioning, increase its market capitalization, and
strengthen its application ecosystem. The success of this M&A serves as a powerful
example of how a strategic acquisition can drive sustainable growth and create a long-
term competitive advantage in a rapidly evolving industry.

4.2 . Unsuccessful Example: AOL and Time Warner Merger (2000)

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 The 2000 merger between AOL and Time Warner, valued at a staggering $165
billion, remains one of the most infamous failures in M&A history. Promoted as a
game-changing deal, the merger was intended to combine AOL’s internet services
with Time Warner’s vast media and entertainment assets, creating a conglomerate that
would dominate both the digital and traditional media markets. However, the
promised synergies failed to materialize, and the merger quickly became a case study
on the potential pitfalls of large-scale M&A.

From the outset, the merger faced significant challenges due to internal and
external factors that ultimately led to its downfall. First, there was a lack of synergy
and alignment between AOL’s dial-up internet services and Time Warner’s traditional
media operations. AOL, which relied on subscription-based revenue, found it difficult
to align with Time Warner's advertising-driven and content-focused business model.
Additionally, AOL’s internet-centric, fast-paced corporate culture clashed markedly
with Time Warner’s more established, traditional media environment. This cultural
disparity led to internal discord and hindered the merged entity’s ability to achieve the
anticipated operational efficiencies.

The situation was further complicated by leadership conflicts and integration

challenges. The management teams of both companies had conflicting visions for the
merged entity, leading to power struggles and inefficiencies. For example, AOL’s
technological infrastructure did not seamlessly integrate with Time Warner’s, creating
logistical challenges and missed opportunities to optimize resources. Shortly after the
merger, the dot-com bubble burst, causing a steep decline in AOL’s stock price. The
internet sector’s downturn magnified the existing integration difficulties and eroded
the deal’s value proposition. By 2002, the company recorded a massive $99 billion
goodwill impairment charge, which reflected the overvaluation and unrealistic
expectations that drove the merger. This financial blow significantly undermined the
company’s stability and investor confidence.

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 The consequences of this failed merger were far-reaching, with substantial
financial losses and a dramatic erosion of shareholder value. In total, the merger is
estimated to have resulted in around $200 billion in losses, as AOL’s market value
continued to decline and other financial write-offs accumulated. The merged entity’s
stock plummeted, losing roughly 80% of its value within two years, leading to
significant losses for shareholders. Many investors, particularly those holding AOL
stock, saw their investments rapidly diminish, which fueled widespread dissatisfaction
and distrust toward the merged entity’s future.

In addition to financial losses, the merger led to organizational turmoil and

significant layoffs. The cultural clash and lack of strategic cohesion created a
challenging work environment, resulting in high turnover among executives and
employees. Several leadership changes took place within the first few years,
exacerbating instability. Thousands of employees were laid off as the company
struggled to cut costs and streamline operations, further weakening morale and
resulting in the loss of institutional knowledge and talent.

The merger also led to a steep decline in AOL’s market position and
competitiveness. AOL, once a dominant internet service provider, was unable to keep
pace with technological advancements such as broadband, which quickly overtook
dial-up. This lack of adaptability caused a sharp drop in subscribers and reduced
advertising revenue. Additionally, the merger failed to leverage potential synergies
between digital and traditional media, as competitors like Google and other emerging
tech giants captured market share and relevance.

By 2009, the companies decided to split, and Time Warner spun off AOL as a
separate entity, marking the formal end of the merger. Following the split, both
companies embarked on rebranding efforts to distance themselves from the failure and
refocus on their core strengths. AOL attempted to reposition itself as a digital media
and advertising company, while Time Warner sought to re-establish itself as a leading
media and entertainment provider.

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 The AOL-Time Warner merger became a cautionary tale for corporate America,
highlighting the risks of ambitious M&A transactions without proper alignment in
strategy and culture. The failure of this merger emphasized the importance of realistic
valuations, comprehensive due diligence, and meticulous post-merger integration
planning. Consequently, companies in the tech and media sectors began to approach
M&A with greater caution, prioritizing strategic compatibility and cultural alignment
to mitigate risks and avoid similar pitfalls. This merger continues to shape M&A
strategies and serves as a stark reminder of the complexities and challenges involved
in large-scale corporate combinations.

5. Conclusion
5.1. Summary
Throughout this presentation, we have explored the concept of Mergers and
Acquisitions (M&A), defining the key differences between mergers and acquisitions,
and discussing their motivations and benefits. M&A can drive business growth by
rapidly expanding market share, increasing customer bases, and creating synergies
between companies. We also looked at the various stages of the M&A process, from
target identification and due diligence to post-merger integration.

By analyzing both a successful and an unsuccessful case, we’ve seen how M&A
can either propel a company to new heights or result in significant financial losses.

5.2. Final Thought:

M&A is a powerful tool in the business world, offering companies the opportunity
to grow rapidly, gain competitive advantage, and enter new markets. However, it is
not without risks. As demonstrated by the AOL-Time Warner failure, poor strategic
fit, lack of synergy, and inadequate integration planning can lead to catastrophic
outcomes. On the other hand, Facebook’s acquisition of Instagram shows how proper
alignment and foresight can turn an acquisition into one of the most valuable assets.

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 The key to successful M&A lies in thorough due diligence, ensuring a strong
cultural fit, and meticulously planning the integration process. When done correctly,
M&A can be a highly effective strategy for sustainable growth and long-term success.

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