The wave of international mergers and acquisitions

As seen from past experience mergers and acquisitions are triggered by economic factors. The macroeconomic environment, which includes the growth in GDP, interest rates and monetary policies play a key role in designing the process of mergers or acquisitions between companies or organizations. First Wave Mergers The first wave mergers commenced from to During this phase merger occurred between companies, which enjoyed monopoly over their lines of production like railroads, electricity etc.

The wave of international mergers and acquisitions

Cash[ edit ] Payment by cash. Such transactions are usually termed acquisitions rather than mergers because the shareholders of the target company are removed from the picture and the target comes under the indirect control of the bidder's shareholders. Stock[ edit ] Payment in the form of the acquiring company's stock, issued to the shareholders of the acquired company at a given ratio proportional to the valuation of the latter.

They receive stock in the company that is purchasing the smaller subsidiary. Financing options[ edit ] There are some elements to think about when choosing the form of payment. When submitting an offer, the acquiring firm should consider other potential bidders and think strategically.

The form of payment might be decisive for the seller. With pure cash deals, there is no doubt on the real value of the bid without considering an eventual earnout. The contingency of the share payment is indeed removed. Thus, a cash offer preempts competitors better than securities.

Taxes are a second element to consider and should be evaluated with the counsel of competent tax and accounting advisers. If the issuance of shares is necessary, shareholders of the acquiring company might prevent such capital increase at the general meeting of shareholders.

The risk is removed with a cash transaction. Then, the balance sheet of the buyer will be modified and the decision maker should take into account the effects on the reported financial results. On the other hand, in a pure stock for stock transaction financed from the issuance of new sharesthe company might show lower profitability ratios e.

However, economic dilution must prevail towards accounting dilution when making the choice. The form of payment and financing options are tightly linked. If the buyer pays cash, there are three main financing options: There are no major transaction costs.

It consumes financial slack, may decrease debt rating and increase cost of debt.

The wave of international mergers and acquisitions

Transaction costs include fees for preparation of a proxy statement, an extraordinary shareholder meeting and registration. If the buyer pays with stock, the financing possibilities are: Issue of stock same effects and transaction costs as described above.

Transaction costs include brokerage fees if shares are repurchased in the market otherwise there are no major costs. In general, stock will create financial flexibility.

Transaction costs must also be considered but tend to affect the payment decision more for larger transactions. Finally, paying cash or with shares is a way to signal value to the other party, e. The following motives are considered to improve financial performance or reduce risk: This refers to the fact that the combined company can often reduce its fixed costs by removing duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit margins.

David Faulkner, Satu Teerikangas, and Richard J. Joseph

This refers to the efficiencies primarily associated with demand-side changes, such as increasing or decreasing the scope of marketing and distribution, of different types of products. Increased revenue or market share: This assumes that the buyer will be absorbing a major competitor and thus increase its market power by capturing increased market share to set prices.

For example, a bank buying a stock broker could then sell its banking products to the stock broker's customers, while the broker can sign up the bank's customers for brokerage accounts.

Or, a manufacturer can acquire and sell complementary products. For example, managerial economies such as the increased opportunity of managerial specialization.More than half of all mergers and acquisitions during the last century cluster within relatively short periods of intense activity known as acquisition waves.

This chapter provides a framework for what is known about such waves, presenting the main characteristics of the five major waves during the last century. It develops an overview of antecedents by focusing on exogenous factors and.

2 ThE RisE of EMERging MARKETs in MERgERs And AcquisiTions | A.T. Kearney to (see figure 2).While india is spear-heading the acquisitions market, Malaysia is a sur-prising second—primarily due to the government providing substantial tax incentives to engage in.

International mergers and acquisitions are also termed as global mergers and acquisitions or cross-border mergers and acquisitions. Globalization and worldwide financial reforms have collectively contributed towards the development of international mergers and acquisitions to a substantial extent.

Mergers and acquisitions (M&A) are transactions in which the ownership of companies, other business organizations, or their operating . The 4th wave merger that started from and ended by was characterized by acquisition targets that wren much larger in size as compared to the 3rd wave mergers.

Mergers took place between the oil and gas industries, pharmaceutical industries, banking and airline industries. Adoption of economic reforms in many countries in the last two decades of the 20th century opened up opportunities of international mergers and acquisitions.

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List of largest mergers and acquisitions - Wikipedia