Dpm Invest Mergers And Acquisitions-9c8814

Business Diversified Portfolio Management Mergers and acquisitions (M&A) and corporate restructuring are a big part of the corporate finance world. Every day, Wall Street investment bankers arrange M&A transactions, which bring separate .panies together to form larger ones. When they’re not creating big .panies from smaller ones, corporate finance deals do the reverse and break up .panies through spinoffs, carve-outs or tracking stocks. Not surprisingly, these actions often make the news. Deals can be worth hundreds of millions, or even billions, of dollars. They can dictate the fortunes of the .panies involved for years to .e. For a CEO, leading an M&A can represent the highlight of a whole career. And it is no wonder we hear about so many of these transactions; they happen all the time. Next time you flip open the newspapers business section, odds are good that at least one headline will announce some kind of M&A transaction. Sure, M&A deals grab headlines, but what does this all mean to investors? To answer this question, this tutorial discusses the forces that drive .panies to buy or merge with others, or to split-off or sell parts of their own businesses. Once you know the different ways in which these deals are executed, you’ll have a better idea of whether you should cheer or weep when a .pany you own buys another .pany – or is bought by one. You will also be aware of the tax consequences for .panies and for investors. The Main Idea One plus one makes three: this equation is the special alchemy of a merger or an acquisition. The key principle behind buying a .pany is to create shareholder value over and above that of the sum of the two .panies. Two .panies together are more valuable than two separate .panies – at least, that’s the reasoning behind M&A. This rationale is particularly alluring to .panies when times are tough. Strong .panies will act to buy other .panies to create a more .petitive, cost-efficient .pany. The .panies will .e together hoping to gain a greater market share or to achieve greater efficiency. Because of these potential benefits, target .panies will often agree to be purchased when they know they cannot survive alone. Distinction between Mergers and Acquisitions Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things. When one .pany takes over another and clearly established itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target .pany ceases to exist, the buyer "swallows" the business and the buyer’s stock continues to be traded. In the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward as a single new .pany rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals." Both .panies’ stocks are surrendered and new .pany stock is issued in its place. For example, both Daimler-Benz and Chrysler ceased to exist when the two firms merged, and a new .pany, DaimlerChrysler, was created. In practice, however, actual mergers of equals don’t happen very often. Usually, one .pany will buy another and, as part of the deal’s terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it’s technically an acquisition. Being bought out often carries negative connotations, therefore, by describing the deal as a merger, deal makers and top managers try to make the takeover more palatable. A purchase deal will also be called a merger when both CEOs agree that joining together is in the best interest of both of their .panies. But when the deal is unfriendly – that is, when the target .pany does not want to be purchased – it is always regarded as an acquisition. Whether a purchase is considered a merger or an acquisition really depends on whether the purchase is friendly or hostile and how it is announced. In other words, the real difference lies in how the purchase is .municated to and received by the target .pany’s board of directors, employees and shareholders. About the Author: 相关的主题文章: