Mergers and Acquisitions

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ACKNOWLEDGEMENT

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

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ABSTRACT

In this study we try to explore the concept of “mergers and acquisitions” in a holistic context. The main focus is on the theories based on mergers and acquisition. The research study is based on the theories presented in the context of mergers.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 2: LITERATURE REVIEW1

2.1 Mergers1

2.2 Acquisition1

2.3 Mergers and Acquisitions1

2.4 Theory of Operating Synergies2

2.5 Theory of Efficiency increase / Restructuring3

2.6 Theories of Agency Problem3

2.7 Theory of Financial Synergies7

2.8 Redistribution theory9

2.9 Market Power theory9

2.10 Tax theory10

2.11 Most of the Gain goes to target companies:10

2.12 Game Theoretical Approach- Mergers and Acquisition11

REFERENCES12

CHAPTER 2: LITERATURE REVIEW

2.1 Mergers

Merger is a formal process of two or more firms getting into a union to form into a single entity for the assets and liabilities transferred by the selling firm and absorbed by the buying firm. In mergers shares transferred (Fisher, Robert, 2003, 1585).

2.2 Acquisition

Takeovers or Acquisition occur between the target organisation and the bidding organisation. There might be friendly or else hostile takeovers (Moeller, Schlingemann, Stulz, 2003, 110). In the act of acquisition, the bidder company might purchase the assets or the shares of the company which is targeted.

2.3 Mergers and Acquisitions

Merger and Acquisitions used at most to have a competitive edge. There were several reasons that contribute to the M & As of the firms like, market share improvement, new markets entry, new product development with research and design etc. The main benefit of mergers and acquisition is that the acquiring firm consider the merger or takeover to a profitable investment. Secondly, the reduction in expenditure in the corresponding fields (Morse, 2002, 1475). Another reason behind the mergers is that the merged firms can operate easily in the offshore overcoming the cross-border affect and even gains the potential to influence the government decision as well.

M&A's and corporate re-structuring are now considered to be an important part of the corporate world. In this, two separate companies come together to form a big organisation. There are numerous theories related to mergers and acquisitions(Morse, 2002, 1463).

2.4 Theory of Operating Synergies

This theory states that the economies of scale do exist in industry and before mergers takes place; the activities performed by firms are insufficient in order to destroy the economies of scale. Operating economies of scale can be achieved through vertical, conglomerate and horizontal mergers (Mueller, 2003, 167). Operating synergies occur due to indivisibility of various resources such as equipments, overheads and people. It is also stated that the productivity of these resources will increase when they are divided over a huger number of units of ...