Mergers and acquisitions
Mergers & Acquisitions (abbr. M&A) are the financial transactions which aim is to create a company with the assets value increasing the total value of assets of two companies that are taking part in the transaction.
Acquisition
When one company 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 company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded.
Merger
It is the combination of two companies of about the same size into the larger one. They agree to go forward as a single company rather than remain separately owned and operated. Such combinations are commonly known as "merger of equal". Both companies' stocks are surrendered and new company stock is issued in its place
Types of M&A transactions
- vertical * occurs when firms in industries at different stages of bringing a good to the final consumer, i.e. extractive, manufacturing or distribution, join together.
- horizontal * occurs when the firms are in the same industry.
- conglomerate * is an amalgamation of firms with dissimilar activities.
World's 10 largest M&A deals
| Rank | Year | Purchaser | Purchased | Transaction value (in mil. USD) |
|---|---|---|---|---|
| 1 | 1999 | Vodafone Airtouch PLC | Mannesmann | 172,200 |
| 2 | 2008 | BHP Billiton | Rio Tinto | 147,400 |
| 3 | 2000 | America Online | Time Warner | 112,100 |
| 4 | 1999 | Pfizer | Warner-Lambert | 118,900 |
| 5 | 2006 | AT&T | BellSouth | 101,900 |
| 6 | 2007 | Royal Bank of Scotland; Fortis; Banco Santander | ABN AMRO | 95,600 |
| 7 | 1998 | EXXON | MOBIL | 85,600 |
| 8 | 2000 | Glaxo Wellcome | SmithKline Beecham | 79,600 |
| 9 | 1998 | SBC Communications | Ameritech | 76,200 |
| 10 | 1998 | Bell Atlantic Corp | GTE | 74,600 |
| Mergers and acquisitions — recommended articles |
| Merger — Ownership interest — Types of joint venture — Large organizations — Business logistics — Inventory costs — Bricks and clicks model — Currency risk — Forward market |
References
- Nahavandi, A., & Malekzadeh, A. R. (1988). Acculturation in mergers and acquisitions. Academy of management review, 13(1), 79-90.
Author: Piotr Lusiński
