Mergers and Acquisitions.docx

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Management and Organizational Studies
Management and Organizational Studies 1023A/B
James O' Brien

Mergers and Acquisitions 1252010 73300 PM Types of Takeovers General GuidelinesFirms can grow by acquiring other firms or by acquiring selected assets from other firms Takeover The transfer of control from one ownership group to anotherThe takeover bid does not have to be for 100 of the shares Creeping Takeovers The acquisition of a target company over time by the gradual accumulation of its shares Acquisition The purchase of one firm by anotherThe acquired firm ceases to exist Ex When ATI was purchased by AMD Merger The combination of two firms into a new legal entity Ex When Daimler and Chrysler merged Amalgamation A genuine merger in which both sets of shareholders must approve the transaction23 necessary for an amalgamation plus a majority of the minority shareholders Cash Transaction The receipt of cash for shares by shareholders in a target companyWhen one company acquires another the approval of the target companys shareholders is required since they have to agree to sell their sharesShare Transaction The offer by an acquiring company of shares or a combination of cash and shares to the target companys shareholders Going Private Transaction or Issuer Bid A special form of acquisition where the purchaser already owns a majority stake in the target companyCommon in CanadaIf a firm owns 90 of its shares it can force the minority of the shareholders to sell their shares at the takeover price Toehold Done by companies to acquire the shares at the market price without paying a premium Tender To sign an authorization accepting a takeover bid made to target company shareholders When the market price immediately jumps above the offer price then the market is saying that a competing offer is likely or that the bid is too low and the bidder will have to increase their priceIf there is very little trading this is usually a bad sign for the acquirer since shareholders are sitting on the shares and are reluctant to sell Shareholder Rights PlanPoison Pill A plan by a target company allowing its shareholders to buy 50 more shares at a discount price in the event of a takeover to make it less attractiveNo longer exist in Alberta Saskatchewan and Ontario but they still can be used as a delaying tactic They cannot be used to frustrate a bid like they can in the USAHorizontal MergerMerger between two firms in the same industryEx Canadian Airlines and WardairRelated Businesses Horizontal RelationshipsSharing tangible resourcesSharing intangible resourcesTransferring competitively valuable expertiseCombining the related activities of separate business into a single operation to lower costsExploiting common use of a wellknown brand nameRelated Diversification May be Effective WhenAn organization competes in a nogrowth or a slow growth industryAdding new but related products would significantly enhance the sales of current productsNew but related products could be offered at highly competitive pricesNew but related products have seasonal sales levels that counterbalance an organizations existing peaks and valleysAn organizations products are currently in the declining stage of the products life cycleAn organization has a strong management teamVertical Integration StrategiesVertical integration extends a firms competitive scope within the same industryBackward into sources of supplyForward toward endusers of final productCan aim at either full or partial integrationConglomerate When two businesses that are unrelated combine
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