Executive Reporting

Presentation

Presenter : Naveen Raju

ID : 1115415

Topic : Justification of
Mergers & Acquisitions

Lecturer : Dr. Chan Kok Eng

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Question:

What explanations for

Mergers & Acquisitions
would you offer if it were found that they
arely produce Positive financial Gains for
the shareholders?

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ecutive Summary
- More and more companies are going for
Mergers & Acquisitions for reasons like
Synergy, Reduction of Competition,
Increased Market share, Economies of
Scale, Improved Cost Efficiency.

-
The Shareholders rarely get the Financial
Gains

-
Analysis say that Cash-financed Mergers
are better than Stock-financed Mergers

- It is recommended that Stockholders must

be encouraged to actively involve in the
decision-making process #
rger & Acquisition
ergers & Acquisitions – Corporate strategy, corporate finan
d management dealing with the buying, selling & combining
different companies that can aid, finance, or help a growing
mpany in a given industry grow rapidly without having to
eate another business entity.

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&A Plus & Minuses

Advantages Disadvantages

Synergy Poor Organization Fit

Reduced Acquirer ‘s Stock fall

Competition
Increased Market Size Issue Conflicts
Share
Resource Transfer

Economies of Scale
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eal-Life Example

Click to edit Master text styles

to edit Master text styles
nd level Second level 2005
● Third level
hird level Combined Profit
● Fourth level
Fourth level 8.36 billion US$
● Fifth level ● Fifth level

Profit-5 billion US$ Profit-3.36 billion US$

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eal-Life Example

Click to edit Master text styles

to edit Master text styles
nd level Second level 2005
● Third level
hird level Combined Profit
● Fourth level
Fourth level 8.36 billion US$
● Fifth level ● Fifth level

Profit-5 billion US$ Profit-3.36 billion US$

2006

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eal-Life Example

Click to edit Master text styles

to edit Master text styles
nd level Second level 2005
● Third level
hird level Combined Profit
● Fourth level
Fourth level 8.36 billion US$
● Fifth level ● Fifth level

Profit-5 billion US$ Profit-3.36 billion US$

2007
Profit After Merger
10.37 billion US$

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&A Failure Analysis
Agency Theory – Corporations can function
effectively even though their managers are
highly self-interested

Protecting Shareholder
Interest

Stockholders interest in
Greater Returns

Managers are Self-

interested & Unwilling
to sacrifice them

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&A Failure Analysis
Agency Theory – Corporations can function
effectively even though their managers are
highly self-interested

Protecting Shareholder
Interest

Stockholders interest in
Greater Returns

Managers are Self-

interested & Unwilling
to sacrifice them

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ailure Analysis

Size Issues - Mismatch between the

Acquirer & the Acquiree

Unsuccessful - Merger between companies

Diversification from different industry
backgrounds

Paying in Stock - Resulting in Stock fall of

instead of Cash the Acquirer

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ailure Analysis

Poor Strategic Fit - Incompatible Strategies of

the two Organizations

Paying Too Much - Highest bidder wins

Acquiree resulting in
Financial crunch

Poor Organization - Mismatch between

Fit Administrative Practices,
Cultural Practices

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to make Successful M&A
Merge with Company ha
Pay Sensibly Right Industry fit &
for acquiring Compatible Strategy
the TargetRatio of Cash to be higher Culture
Company than Stock to acquire

Successful Merger or Acquisition

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ecommendations
Make sure what is good for
Management is good for
Stockholders as well
Establish a Strong & Independent
Board of Directors representing
Stockholders
Encourage Stockholders to Actively
take part in Decision-making
Process

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Reference

-Organizational Behaviour – 9th Edition – Shermerhorn/Hunt/Osborn

-http://www.springerlink.com/content/j06k733x25t80440/

-http://www.aims-international.org/P1.1.4.pdf

-http://www.uwsp.edu/BUSINESS/CWERB/2ndQtr01/SpecialReportQtr

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THANK
YOU
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