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Questions about Mergers & Acquisitions

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1. List and define three types of M&As. Explain how they work.

2. Provide two different theoretical explanations for how value can be created through M&As. Provide one theoretical explanation for how value can be destroyed through an M&A.

3. Describe the main steps in the screening process. Which do you think is the most important step? Justify your answer.

4. List and explain three main types of valuation techniques commonly used in M&As. Which do you feel is most useful? Explain.

5. List three types of corporate restructuring and explain how they work.

6. What is corporate governance? How can bad corporate governance adversely impact a company? How can good corporate governance positively impact a company? Who is most responsible for conducting corporate governance? List three examples of companies that had problems with corporate governance?

Solution Preview

Most of the following are expressed in the OTA's own words.

Question 1:

1. Conglomerate merger and acquisition - in this type of M&A, a company acquires or merges with another company which might share the same marketing and distribution channel or perhaps production processes. The bottom line is both organizations' businesses are wholly unrelated which can also mean both of them operates within different industries.
2. Horizontal merger and acquisition - this M&A happens when a company acquires or merges with another which manufactures, distributes and sells similar products or services within the same geographic location.
3. Vertical merger and acquisition - this type of M&A happens when a firm acquires or merges with another company which has been supplying or distributing products to or from the firm.

Question 2:

Values can be created through mergers and acquisition through the benefit of cost savings from the integration of several of the processes of the merged companies. For example, back office functions such as accounting and sales and marketing can lead to significant cost savings for the new entity. Moreover, value is also created as a result of the 'acquisition' of external growth ...

Solution Summary

This solution discusses mergers and acquisitions.