Lesson-6-Mergers-And-Aquissistion-2024 PDF

Lesson 6 Mergers and Acquisitions Prepared by : Ma. Antonina DC. Santiago, MBA What Are Mergers and Acquisitions (M&A)? A merger is a corporate strategy to combine with another company and operate as a single legal entity. The companies agreeing to mergers are typically equal in terms of size and...

Lesson 6 Mergers and Acquisitions Prepared by : Ma. Antonina DC. Santiago, MBA What Are Mergers and Acquisitions (M&A)? A merger is a corporate strategy to combine with another company and operate as a single legal entity. The companies agreeing to mergers are typically equal in terms of size and scale of operations.  Purchase and absorb another company outright  Merge with it to create a new company  Acquire some or all of its major assets  Make a tender offer for its stock  Stage a hostile takeover Mergers refer to the process of combining two or more companies into a single entity, often to achieve strategic business objectives such as: 1. Increased market share 2. Improved efficiency 3. Enhanced competitiveness 4. Expanded product or service offerings 5. Access to new markets or technologies 6. Reduced costs 7. Improved financial performance The merger process involves: 1. Due diligence: Thorough examination of the target company's financials, operations, and assets. 2. Valuation: Determination of the target company's worth. 3. Negotiation: Agreement on terms, including price, structure, and integration plans. 4. Regulatory approval: Compliance with antitrust laws and other regulatory requirements. 5. Integration: Combining operations, systems, and cultures. Mergers can be Benefits of mergers classified as: include: 1. Friendly merger: 1. Synergies: Cost savings Both companies and revenue agree to the enhancements. merger. 2. Hostile merger: 2. Increased scale: One company Improved attempts to acquire competitiveness and another without market presence. agreement. 3. Reverse merger: A 3. Diversification: private company Reduced risk and acquires a publi expanded offerings. Types of Mergers: 1. Horizontal Merger: Combination of companies in the same industry (e.g., PLDT and Smart Communications). 2. Vertical Merger: Combination of companies at different stages of production (e.g., San Miguel Corporation and Philippine Airlines). 3. Conglomerate Merger: Combination of companies from unrelated industries (e.g., Ayala Corporation and Globe Telecom). 4. Consolidation Merger: Combination of companies to form a new entity (e.g., SM Investments Corporation and National Bookstore). 1. Horizontal Merger: Combination of companies in the same industry 2. Vertical Merger: Combination of companies at different stages of production 3. Conglomerate Merger: Combination of companies from unrelated industries 4. Consolidation Merger: Combination of companies to form a new entity Acquisitions In an acquisition, a new company does not emerge. Instead, the smaller company is often consumed and ceases to exist, with its assets becoming part of the larger company. ✓ Acquisitions, sometimes called takeovers, generaly carry a more negative connotation than mergers. ✓ As a result, acquiring companies may refer to an acquisition as a merger even though it’s clearly a takeover. ✓ An acquisition takes place when one company takes over all of the operational management decisions of another company. ✓ Acquisitions require large amounts of cash, but the buyer’s power is absolute. An acquisition is a business strategy where one company (the acquirer) purchases a majority or all of Types of Acquisitions: 1. Share Acquisition: the shares, assets, orBuying interests of majority or all another shares of a company company (the target). This allows the of a acquirer to: (e.g., Microsoft acquiring LinkedIn). 2. Asset Acquisition: Buying specific assets company (e.g., JG Summit Holdings acquiring United Laboratories). 3. Equity Acquisition: 1. Gain control and Buying equity ownership interests in a company (e.g., 2. ExpandAyala market share and presence Corporation acquiring a stake in Globe Telecom). 4. Debt Acquisition: Buying debt 3. Enhance product obligations or service of a company offerings (e.g., banks acquiring 4. Increase efficiency and reduce costs debt from distressed companies). 5. Access new technologies, markets, or expertise Types of Acquisitions: 1. Share Acquisition: Buying majority or all shares of a company (e.g., Microsoft acquiring LinkedIn). 2. Asset Acquisition: Buying specific assets of a company (e.g., JG Summit Holdings acquiring United Laboratories). 3. Equity Acquisition: Buying equity interests in a company (e.g., Ayala Corporation acquiring a stake in Globe Telecom). 4. Debt Acquisition: Buying debt obligations of a company (e.g., banks acquiring debt from distressed companies). Process of acquisitions: 1. Friendly acquisition: Mutual agreement between companies 2. Hostile acquisition: Acquirer purchases shares without target's consent 3. Strategic acquisition: Aligns with acquirer's business goals 4. Financial acquisition: Focuses on financial gains 5. Private equity acquisition: Involves private equity firms  Benefits: Acquisition structures: 1. Increased market 1. Asset purchase: share and Buying specific assets competitiveness 2. Share purchase: 2. Improved efficiency Buying majority or all and cost savings shares 3. Enhanced product 3. Merger: Combining or service offerings companies into one 4. Access to new entity markets, technologies, 4. Consolidation: or expertise Combining 5. Potential for companies into a increased revenue new entity and profitability Notable acquisitions in the Philippines: 1. PLDT (Philippine Long Distance Telephone Company) acquired Smart Communications 2. San Miguel Corporation acquired Philippine Airlines 3. Ayala Corporation acquired Globe Telecom 4. SM Investments Corporation acquired National Bookstore 5. JG Summit Holdings acquired United Laboratories What Is an Acquisition? An acquisition is a transaction in which one company purchases most or all of another company’s shares to gain control of that company. Common M&A Structures in the Philippines: 1. Stock Purchase Agreement (SPA) 2. Asset Purchase Agreement (APA) 3. Merger Agreement 4. Share Swap Agreement 5. Joint Venture Agreement Industry-wise M&A in the Philippines: 1. Telecommunications (e.g., PLDT-Smart merger) 2. Banking and Finance (e.g., Bank of the Philippine Islands-Metrobank merger) 3. Food and Beverage (e.g., Jollibee-Mang Inasal acquisition) 4. Real Estate (e.g., Ayala Land-Prime Orion acquisition) 5. Energy and Utilities (e.g., Meralco-Global Business Power acquisition) Key Players in Philippine M&A: 1. Conglomerates (e.g., Ayala, SM, San Miguel) 2. Private Equity Firms (e.g., KKR, Blackstone) 3. Investment Banks (e.g., UBS, JPMorgan) 4. Law Firms (e.g., ACCRA, SyCipLaw) 5. Financial Advisors (e.g., PwC, Deloitte) Global examples: 1. Amazon acquired Whole Foods Market 2. Microsoft acquired LinkedIn 3. Disney acquired 21st Century Fox 4. Facebook acquired Instagram and WhatsApp 5. Alphabet (Google) acquired YouTube and Android