It is about the business merger acquisition take over and also types are discussed.

1. Assignment of E-Commerce
Submitted To:
Sir Shahzad
Submitted By:
Naveed Aslam 1018
B.B.A 7th
Semester (M)
University of Education Lahore
Okara Campus

2. Acquisition and Global strategy
An acquisition or takeover is the purchaseof one business or company by another
company or other business entity. Such purchase may be of 100%, or nearly up to
100%, of the assets or ownership equity of the acquired entity.
Acquisition vs merger vs joint venture
Acquisition:
Acquisitions are often made as part of a company's growth strategy whereby it is
more beneficial to take over an existing firm's operations and niche compared to
expanding on its own. Acquisitions are often paid in cash, the acquiring company's
stock or a combination of both.
Merger:
Two firms agree to integrate their operations on a relatively co-equal basis. There
are few true mergers because one firm usually dominates in terms of market share,
size, or asset value.
Joint venture:
It is a business agreement in which two or more parties agree to pool their
resources for the purpose of accomplishing a specifies task. This task can be new
project or anyother business activity. Each of the participant is responsible for the
profit loss and cost associated with it . However the venture has its own entity
separate from the parties and other business interests.
Takeover:
Special type of acquisition strategy wherein the target firm did not solicit the
acquiring firm's bid.

3. Types of takeover
Friendly takeovers:
A "friendly takeover" is an acquisition which is approved by the management.
Before a bidder makes an offer for another company, it usually first informs the
company's board of directors. In an ideal world, if the board feels that accepting
the offer serves the shareholders better than rejecting it, it recommends the offer
be accepted by the shareholders.
In a private company, because the shareholders and the board are usually the
same people or closely connected with one another, private acquisitions are
usually friendly. If the shareholders agree to sell the company, then the board is
usually of the same mind or sufficiently underthe orders of the equity shareholders
to cooperate with the bidder.
Hostile takeovers:
A "hostile takeover" allows a bidder to take over a target company whose
management is unwilling to agree to a merger or takeover. A takeover is
considered "hostile" if the target company's board rejects the offer, but the bidder
continues to pursue it, or the bidder makes the offer directly after having
announced its firm intention to make an offer
Ways to conduct takeover
 A tender offer can be made where the acquiring company makes a public
offer at a fixed price above the current market price
 An acquiring company can also engage in a proxy fight, whereby it tries to
persuade enough shareholders, usually a simple majority, to replace the
management with a new one which will approve the takeover
 . Another method involves quietly purchasing enough stock on the open
market, known as a "creeping tender offer", to effect a change in
management. In all of these ways, management resists the acquisition, but it
is carried out anyway.

4. Reverse takeovers:
A "reverse takeover" is a type of takeover where a private company acquires
a public company. This is usually done at the instigation of the larger,
private company, the purpose being for the private company to effectively
float itself while avoiding some of the expense and time involved in a
conventional ipo.
Backflip takeovers:
A "backflip takeover" is any sort of takeover in which the acquiring
company turns itself into a subsidiary of the purchased company. This type
of takeover can occur when a larger but less well-known company purchases
a struggling company with a very well-known brand
Examples
 The texas air corporation takeover of continental airlines but taking the
continental name as it was better known.
 Nationsbank's takeover of the bank of America, but adopting bank of
America's name.
Financing a takeover
Funding:
Often a companyacquiring anotherpays specified amountfor it. This money
can be raised in a number of ways. Although the company may have
sufficient funds available in its account, remitting payment entirely from the
acquiring company's cash on hand is unusual. More often, it will be
borrowed from a bank, or raised by an issue of bonds. Acquisitions financed
through debt are known as leveraged buyouts, and the debt will often be
moved down onto the balance sheet of the acquired company. The acquired
company then has to pay back the debt. This is a technique often used by
private equity companies. The debt ratio of financing can go as high as 80%
in some cases. In such a case, the acquiring company would only need to
raise 20% of the purchase price.

5. Loan note alternatives:
Cash offers for public companies often include a "loan note alternative" that
allows shareholders to take a partor all of their consideration in loan notes rather
than cash. This is done primarily to make the offer more attractive in terms of
taxation. A conversion of shares into cash is counted as a disposal that triggers a
payment of capital gains tax, whereas if the shares are converted into other
securities, such as loan notes, the tax is rolled over.
All share deals:
A takeover, particularly a reverse takeover, may be financed by an all share deal.
The bidder does not pay money, but instead issues new shares itself to the
shareholders of the company being acquired. In a reverse takeover the
shareholders of the company being acquired end up with a majority of the shares
in, and so control of, the company making the bid. The company has managerial
rights
Reasons for acquisition
1. Increased market power:
market power is increased by:
 Horizontal acquisitions: other firms in the same industry
e.g(mcdonald’s acquisition of boston market).
 Vertical acquisitions: suppliers or distributors of the acquiring
firm wantdisney company’s acquisition of fox family worldwide
1.1. Factors including:
 The ability to sell goods or services above competitive levels
costs of primary or support activities are below those of competitors
 Size of the firm, resources, and capabilities to compete in the market and
share of the market
 purchaseof a competitor, a supplier, a distributor, or a business in a highly
related industry

6. 2.Overcoming entry barriers
 Entry barriers
 Factors associated with the market or with the firms operating
in it that increase the expense and difficulty faced by new
ventures trying to enter that market
 Economies of scale
 Differentiated products
 Cross-border acquisitions:
Acquisitions made between companies with headquarters in different
countries
 Are often made to overcome entry barriers
 Can be difficult to negotiate and operate because of the
differences in foreign cultures
 Cost of new product development and increased speed to market:
 Internal development of new products is often perceived as high-risk
activity.
 Acquisitions allow a firm to gain access to new and current products that
are new to the firm.
 Compared with internal product development, acquisitions:
 Are less costly
 Have faster market penetration
 Have more predictable returns due to the
acquired firms’ experience with the products

7. 3. Lower risk compared to developing new products:
 Outcomes for an acquisition can be more easily and accurately
estimated than the outcomes of an internal product
development process.
 Acquisition strategies are a common means of avoiding
risky internal ventures and risky R & D investments.
 Acquisitions may become a substitute for innovation, and
thus should always be strategic rather than defensive in
nature.
4. Increased diversification:
 Using acquisitions to diversify a firm is the quickest and easiest way to
change its portfolio of businesses.
 Both related diversification and unrelated diversification
strategies can be implemented through acquisitions.
 The more related the acquired firm is to the acquiring
firm, the greater is the probability that the acquisition
will be successful.
5. Learning and developing new capabilities:
An acquiring firm can gain capabilities that the firm does not
currently possess:
 special technological capability
 a broader knowledge base
 reduced inertia

8. Problems In Achieving Acquisition Success
Acquisition strategies are not problem-free, even when pursued for
value-creating reasons.
● Research suggests:
20% of all mergers and acquisitions are successful
60% produce disappointing results
20% are clear failures,
with technology acquisitions reporting even higher failure rates.
Integration Difficulties
Integration challenges include:
• Melding two disparate corporate cultures
• Linking different financial and control systems
• Building effective working relationships (particularly when
management styles differ)
• Resolving problems regarding the status of the newly acquired firm’s
executives
Large or Extraordinary Debt
High debt (e.g., junk bonds) can:
• Increase the likelihood of bankruptcy
• Lead to a downgrade of the firm’s credit rating
Too Much Diversification
• Increased operational scope created by diversification may cause
managers to rely too much on financial rather than strategic controls
to evaluate business units’ performances
• Strategic focus shifts to short-term performance
• Acquisitions may become substitutes for innovation

9. Pros and cons of takeover
While pros and cons of a takeover differ from case to case, there are a few
reoccurring ones worth mentioning.
Pros:
1. Increase in sales/revenues (e.g. Procter & gamble takeover of gillette)
2. Venture into new businesses and markets
3. Profitability of target company
4. Increase market share
5. Decreased competition (from the perspective of the acquiring company)
6. Reduction of overcapacity in the industry
7. Enlarge brand portfolio (e.g. L'oréal's takeover of body shop)
8. Increase in economies of scale
9. Increased efficiency as a result of corporate synergies/redundancies
10.Expand strategic distribution network
Cons:
1. goodwill, often paid in excess for the acquisition
2. Culture clashes within the two companies causes employees to be less-
efficient or despondent
3. Reduced competition and choice for consumers in oligopoly markets. (bad
for consumers, although this is good for the companies involved in the
takeover)
4. Likelihood of job cuts
5. Cultural integration/conflict with new management
6. Hidden liabilities of target entity
7. The monetary cost to the company
8. Lack of motivation for employees in the company being bought.