Mergers and acquisitions involve the consolidation of companies through mergers or acquisitions. Mergers combine two companies to form one, while acquisitions involve one company taking over another. Companies pursue mergers and acquisitions for reasons such as increasing capabilities, gaining competitive advantages or larger market share, surviving difficult financial times, cutting costs by combining operations, replacing leadership, diversifying products/services, eliminating competition, and achieving tax and operational efficiencies.

1. Presented By :- Patil Kalpesh Raghunath
Harsh Kumar Sharma

2. Definition
• Mergers and acquisitions (M&A) are defined as consolidation of companies
• Mergers is the combination of two companies to form one
• Acquisitions is one company taken over by the other
3/25/2018 IABM, Bikaner 2

3. Reasons of Mergers and Acquisition
3/25/2018 IABM, Bikaner 3

4. 1. Increasing capabilities: Increased capabilities may come from expanded research
and development opportunities or more robust manufacturing operations (or any
range of core competencies a company wants to increase). Similarly, companies may
want to combine to leverage costly manufacturing operations

5. 2. Gaining a competitive advantage or larger market share: Companies may
decide to merge into order to gain a better distribution or marketing network. A
company may want to expand into different markets where a similar company is
already operating rather than start from ground zero, and so the company may just
merge with the other company
3/25/2018 IABM, Bikaner 5

6. 3. Surviving: It’s never easy for a company to willingly give up its identity to
another company, but sometimes it is the only option in order for the company to
survive. During the financial crisis, many banks merged in order to deleverage failing
balance sheets that otherwise may have put them out of business.
3/25/2018 IABM, Bikaner 6

7. 4. Cutting costs: When two companies have similar products or services, combining
can create a large opportunity to reduce costs. When companies merge, frequently
they have an opportunity to combine locations or reduce operating costs by
integrating and streamlining support functions
3/25/2018 IABM, Bikaner 7

8. 5. Replacing leadership: In a private company, the company may need to merge or
be acquired if the current owners can’t identify someone within the company to
succeed them. The owners may also wish to cash out to invest their money in
something else, such as retirement
3/25/2018 IABM, Bikaner 8

9. 6. Diversifying products or services: Another reason for merging companies is to
complement a current product or service. Two firms may be able to combine their
products or services to gain a competitive edge over others in the marketplace. For
example, in 2008, HP bought EDS to strengthen the services side of their technology
offerings (this deal was valued at about US$13.9 billion)
3/25/2018 IABM, Bikaner 9

10. 7. Eliminate Competition: Many M&A deals allow the acquirer to eliminate future
competition and gain a larger market share in its product's market. The downside of
this is that a large premium is usually required to convince the target company's
shareholders to accept the offer. Dow Chemical completed its merger with DuPont
to create the world's largest chemical company in terms of sales, now known as
DowDuPont (DWDP)
3/25/2018 IABM, Bikaner 10

11. 8. Tax and Operational Efficiency Advantages: If one of the firms involved in the merger
has previously sustained net losses, those losses can be offset against the profits of the firm
that it has merged with, a significant benefit to the newly merged entity. In 2001, struggling
computing giant HP announced it would acquire similarly struggling competitor Compaq
3/25/2018 IABM, Bikaner 11

12. 3/25/2018 IABM, Bikaner 12