Takeovers
The premium over the market price offered by the acquirer for the target’s shares is the key driving factor used by the target to determine if it will support or resist the takeover. After deciding to resist, the target company…
Transaction Characteristics
The form of acquisition, payment method, and mindset of target management plays a major role in determining how transactions will be valued, how the transactions will occur, how the transaction will be taxed, and which regulatory rule may apply. Form…
Mergers and Industry Life Cycle
As an industry proceeds through its life cycle, the type of merger and the motivation behind the merger will vary. $$\small{\begin{array}{l|l|l|l} \textbf{Industry Life Cycle Stage} & \textbf{Industry Characteristics} & \textbf{Merger Motivations} & \textbf{Types of Mergers}\\ \hline\textbf{Pioneer/development} & {\text{Slowly increasing sales}\\…
Bootstrapping Earnings
Bootstrapping earnings (or bootstrap effect) occurs when a company’s earnings increase because of the merger transaction instead of the resulting economic benefit of the merger. Example: Bootstrapping Earnings Axon Ltd. has identified an opportunity to merge with Symbian systems to…
Motivations behind Mergers
Synergy Synergy is the concept that the combined performance and value of two companies will be greater than the sum of the separate parts. Synergies created through mergers will either increase revenues or reduce costs through economies of scale in…
Classification of Mergers and Acquisitions
The financial and operational consequences of mergers and the motive for the mergers are key aspects that management and analysts need to understand. An acquisition occurs when a company purchases a portion or all of another company’s shares, effectively controlling…
