Formation Of A Merger Essay

Table of Contents
INTRODUCTION 1
OVERVIEWS OF MERGERS AND ACQUISITIONS 1
TYPES OF MERGERS 2
HORIZONTAL MERGERS 2
VERTICAL MERGERS 2
CONGLOMERATE MERGERS 3
FORM OF MERGER TRANSACTION 3
SHARE ACQUISITIONS 3
ASSET ACQUISITIONS 3
JOINT VENTURES 3
REASONS FOR MERGER ACTIVITIES 4
MERGER VALUATION 4
COMPARATIVE RATIOS 4
DISCOUNTED CASH FLOW (DCF) 5
CONCLUSION 5

Introduction

Corporate restructuring is the process involved in changing the organization of a business. It can involve making dramatic changes by cutting out or merging departments that often has the effect of displacing staff members. It is usually made when there are significant problems in a company, which are causing some form of financial harm and putting the overall

This type of mergers raises three basic competitive problems. The first problem is the competition between the merging companies is eliminated. The unification of the operations of merging companies might create substantial market power and might enable the merged entity to raise prices by reducing output unilaterally is the second problem raises by horizontal mergers. The last problem is the transaction might strengthen the ability of the remaining market participants to coordinate their pricing and output decisions if the concentration in the relevant market is

The most common reasons for any business combination are economic at their core. The following are some of the reasons of merger activities.

Increasing capabilities – increased capabilities may approach from prolonged research and development chances or more vigorous manufacturing operations. Companies may desire to merge leverage costly manufacturing operations. Capability may come from acquiring a unique technology platform rather that trying to build it.

Gaining a competitive advantage or larger market share – companies may decide to merge interest in order to gain a better distribution or marketing network. A company may want to develop into diverse markets where a similar company is already operating rather than starting from zero, and so the company may just merge with other company. This distribution or marketing network gives both companies a wider customer base practically overnight.

Cutting costs – when two firms that has similar products or services joining together, it can create a big chance to reduce costs. When the firms merge, they will have an opportunity to combine spots or reduce operating costs by joining together and streamlining support functions. The company can maximize profit when the total cost of production of services or products is lowered as the volume