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Questions and Answers
What is a merger?
What is a merger?
A corporate strategy to combine with another company and operate as a single legal entity.
Which of the following is NOT a typical reason for mergers?
Which of the following is NOT a typical reason for mergers?
What is due diligence in the merger process?
What is due diligence in the merger process?
Thorough examination of the target company's financials, operations, and assets.
What type of merger involves companies in the same industry?
What type of merger involves companies in the same industry?
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In an acquisition, a new company typically emerges.
In an acquisition, a new company typically emerges.
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What is an asset acquisition?
What is an asset acquisition?
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Match the types of mergers with their descriptions:
Match the types of mergers with their descriptions:
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What is a hostile merger?
What is a hostile merger?
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What is one potential benefit of mergers?
What is one potential benefit of mergers?
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Study Notes
Mergers and Acquisitions (M&A)
- Merger: Companies combine to operate as one legal entity, typically equal in size and scale.
- Acquisition: One company takes over another, often absorbing it completely.
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Types of Mergers:
- Horizontal merger: Companies in the same industry merge (e.g., PLDT and Smart Communications).
- Vertical merger: Companies at different stages of production merge (e.g., San Miguel Corporation and Philippine Airlines).
- Conglomerate merger: Companies from unrelated industries merge (e.g., Ayala Corporation and Globe Telecom).
- Consolidation merger: Companies form a new entity (e.g., SM Investments Corporation and National Bookstore).
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Benefits of Mergers:
- Synergies: Cost savings and revenue enhancements.
- Increased scale: Improved competitiveness and market presence.
- Diversification: Reduced risk and expanded offerings.
Merger Process:
- Due diligence: Examination of the target company's financials, operations, and assets.
- Valuation: Determining the target company's worth.
- Negotiation: Agreement on terms including price, structure, and integration plans.
- Regulatory approval: Compliance with antitrust laws and other requirements.
- Integration: Combining operations, systems, and cultures.
Types of Mergers Based on Agreement:
- Friendly merger: Both companies agree to the merger.
- Hostile merger: One company attempts to acquire another without agreement.
- Reverse merger: A private company acquires a public company.
Acquisitions
- Acquisition: One company purchases all or a majority portion of another company's shares, assets, or interests.
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Types of Acquisitions:
- Share acquisition: Buying a majority or all shares of a company (e.g., Microsoft acquiring LinkedIn).
- Asset acquisition: Buying specific assets of a company (e.g., JG Summit Holdings acquiring United Laboratories).
- Equity acquisition: Buying equity interests in a company (e.g., Ayala Corporation acquiring a stake in Globe Telecom).
- Debt acquisition: Buying debt obligations of a company (e.g., banks acquiring debt from distressed companies).
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Key Points:
- Acquisitions are sometimes called takeovers.
- Acquiring companies may refer to an acquisition as a merger even if it is a takeover.
- Acquisitions require significant cash investment but provide complete control.
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Description
Explore the key concepts of mergers and acquisitions, including definitions, types of mergers, and benefits. This quiz covers horizontal, vertical, conglomerate, and consolidation mergers, along with the merger process. Test your understanding of how companies combine to enhance their operations.
