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Acquisitions
 

Acquisitions

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    Acquisitions Acquisitions Presentation Transcript

    • ACQUISITIONS PRESENTED BY Asian School of Business Management
    • TAKE OVERS ACQUISITIONS PROXY CONTENT GOING PRIVATE
    • WHAT IS ACQUISITION AND WHAT IS THE BASIC PRINCIPLE UNDERLYING IT?
      • An investment made under uncertainty
      • A firm should be acquired if it generates a positive NPV to the shareholders of the acquiring firm.
    • ACQUISITIONS MERGER OR CONSOLIDATION ACQUISITION OF STOCK ACQUISITION OF ASSETS
    • MERGER OR CONSOLIDATION
    • MERGER
      • Acquisition of one firm by another
      • Acquiring firm retains its name and identity
      • Acquires all assets and liabilities of the acquired firm
      • After merger, the acquired firm ceases to exist as a separate legal entity.
    • CONSOLIDATION
      • Similar to that of Mergers.
      • Entirely new firm is created.
      • Both acquiring and acquired firms terminate their previous legal existence
      • Become a part of new firm.
    • ADVANTAGES
      • Legally straight forward
      • Less costly than other forms of acquisition s
      • Avoids necessity of transferring title of each individual asset of the acquired firm to the acquiring firm.
    • DISADVANTAGES
      • Shareholder’s approval is required - Two-thirds of the shares are required for approval
      • Appraisal rights of the shareholders of acquired firm i.e. they can demand that their shares be purchased at fair value by the acquiring firm.
      • It results in expensive legal proceedings
    • ACQUISITION OF STOCK
      • Purchase the firm’s voting stock in exchange for cash, shares of stock or other securities.
      • May start as a private offer from the management of one firm to another.
      • May also start as a direct offer to the selling firm’s stockholders.
      • May be accomplished by use of a tender offer.
    • FACTORS INVOLVED IN CHOOSING BETWEEN ACQUISITION OF STOCK AND MERGER
      • No shareholder meeting is held or vote is required.
      • Target firm’s BODs can be bypassed and direct transaction can be done with the shareholders using a tender offer.
      • Acquisition of stock is often unfriendly.
      • Frequently a minority shareholders will hold out in a tender offer thus the target firm cannot be completely absorbed.
    • ACQUISITION OF ASSETS
      • Acquiring another firm by purchasing all its assets.
      • Formal vote of selling firm is required.
      • This avoid the potential problem of having minority shareholders.
      • It involves transferring title to assets.
      • Legal process of transferring assets is costly.
    • TYPES OF ACQUISITIONS HORIZONTAL ACQUISITION VERTICAL ACQUISITION CONGLOMERATE ACQUISITION
    • HORIZONTAL ACQUISITION
      • Acquisition of a firm under the same industry as the acquiring firm.
      • Eg. Takeover of Raasi cements by India cements)
    • VERTICAL ACQUISITION
      • Involves firms at different steps of the production process
      • Backward integration
        • Takeover of some tea plantations by Brooke Bond which is a tea processing and marketing company
      • Forward Integration
        • Acquisition by the Calcutta based Delta Industries, a jute yarn producing firm, of the Netherlands Jute Industries, a company processing yarn into finished products and marketing jute products in Europe.
    • CONGLOMERATE M&As
      • Involves companies whose businesses are different.
      • A part of diversification strategy of a company
      • Eg. Takeover of Transelectra, Goodknight brands by Godrej.