Adidas Merger Essay

Question 1: Mergers
Introduction
A merger is the voluntary fusion of two companies on broadly equal of two companies on broadly equal terms into one new legal entity. The firms that agree to merge are roughly equal in terms of size, customers, scale of operations, etc. for this reason, the term “merger of equals” is sometimes used. Merger are most commonly done to gain market share, reduce costs of operations, expand to new territories, unite common products, grow revenues and increase profits, all of which should benefit the firms’ shareholders. After merger, shares of the new company are distributed to existing shareholders of both business.
Background to the story
Denver made a decision to ask Cara if she wants to merge with him for their

At the time of merger, the adidas group was the second largest sports goods maker in the world with a market capitalization of nearly US $9 billion. Reebok was the third largest sports apparel and equipment manufacturer in the world with a market capitalization of around US $4 billion. The merger process was completed in the January month of 2006. The overall net value of the merger entity was nearly US $12 billion. The merger process was completed in the January month of 2006. The overall net value of the merger entity was nearly US $ 12 billion. The share prices of both the companies have increased since the merger process started till the completion of the merger. Adidas took over all the stocks of Reebok which are issued by Reebok and even the stocks from the open market. Adidas paid US $ 59 for each share of Reebok. On the day of decision of the merger, the Adidas stock in the Frankfurt stock exchange has raised by 7% which is from € 147 on the 2nd of August, 2005 to € 158 on the 3rd of August, 2005. The Reebok stock in the New York Stock Exchange has risen by nearly 30% on a single day. The share value increased from US $ 44 to US $ 57 from 2nd of August 2005 to 3rd of August 2005

They may be seeking to achieve economies of scale, greater market share, increased synergy, cost reductions, or new niche offerings. If they wish to expand their operations to another country, buying an existing company may be the only viable way to enter foreign market, or at least the easiest way: The purchased business will already have its own personnel (both labor and management), a brand name and other intangible assets, ensuring that the acquiring company will start off with a good customer base. Acquisitions are often made as part of a company’s growth strategy when it is more beneficial to take over an existing firm’s operation than it is to expanding on its own. Large companies eventually find it difficult to keep growing without losing efficiency. Whether because the company is becoming too bureaucratic or it runs into physical or logistical resource constraints, eventually its marginal productivity peaks. To find higher growth and new profits, the large firm may look for promising young companies to acquire and incorporate into its revenue