merger and acquisitions: introduction

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Merger and Acquisitions: Introduction

Presented byJosua Tarigan, SE, MBA, CMA, CFP, CSRS

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Your Text Book

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Merger and Acquisitions Trends

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Scorecard of Worldwide M&A (Thomson Reuters)

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Worldwide M&A by Target Industry(Thomson Reuters)

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Asian M&A by Target Industry(Thomson Reuters)

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Top Fifteen Worldwide M&A 2012(Thomson Reuters)

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Top Ten Asian M&A 2012(Thomson Reuters)

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Case Study: VodafoneLargest Takeover History

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Case Study: Vodafone

Vodafone Air Touch (UK) acquisition Mannesmann AG (German) with value transaction $202.785.130.000 in June 2000.

Both telecom company, actually alliance partners. Mannesmann AG was a large company with 100.000 employees and had been existence for over 100 years

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Case Study: VodafoneMannesmann tried to resist the Vodafone takeover, but the board ultimately agreed to the generous price paid. The price book ratio is 125,5

At first time, Vodafone agree to maintain Mannesmann name, however it was changed slowly-something that made good sense in thi age globalization. In order to reduce marketing cost

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Case Study: VodafoneUp unitl mid-1990s, takeover company from foreigner difficult to complete, as German having corporate governance institution. However since 1990s-2000s the condition was changed

But, the takeoverof Manesmann was a shock to the German corporate world. Parties that were passive began to become more active in response to a popular outcry against any further takeover

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Merger and Acquisitions: Concepts

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Definitions

Merger is combination of two corporations in which only one corporation survives. Another term used is

statutory merger. Example Bank Danamon

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Definitions

Acquisition is another types of Merger, which is called subsidiary merger. Example Semen Gresik Tbk

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Definitions

Consolidation is business combination wherby two or more companies join to form an entirely new

company. Example Bank Mandiri

Bank Pembangunan

Indonesia

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Types of MergersRelated

Vertical: Suppliers or customers (Merck & Medco)

Horizontal: competitors (Exxon & Mobil)

Unrelated

Conglomerate: verything else (Philip Morris & General Foods)

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Reason for M&A

Financial Factors

Tax Motives

Expansion

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Merger Consideration (Payment)

Cash

Mixed Cash & SecuritiesSecurities

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detik.com Acquisition 530 billion (Rp) by PARA Group Juni 2011

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Original owned by Saratoga GroupAcquisition 1 million (Aus$) & stock ownership by IPGA Mei 2011

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M&A Professionals (Financial Advisors) Worldwide 2012(Thomson Reuters)

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M&A Professionals (Legal Advisors) by Target Industry in USA 2012 (Thomson Reuters)

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M&A Professionals (Legal Advisors) by Target Industry in Asian 2012 (Thomson Reuters)

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Merger ArbitrageArbitrage refers to the buying of an asset in one market and selling it in another. Arbitrage is another group of professionals who can play an important role in M&A

The M&A arbitrage business is fraught with risks. Some investment banks have arbitrage departments

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LBO (Leverage Buyouts)LBO is method which the buyer uses DEBT to finance the acquisition of company. Usually there are 2 versions of LBO

LBO usually used by private company to acquire public company, hence “public” becomes private since the buyer is private company and purchase all the equity. This process call going private

Another version of LBI is management buyout, which means the management of company is the buyer

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Reverse MergersA merger in which a private company may go public by merging with an already public company

A reverse merger may take between two to three months to complete whereas an IPO is a more involved process that may longer

Beside quickly, the cost will be lower compare with traditional IPO

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Special Purchase Acquisition Vehicles (SPACS)

SPACs are the companies raise the capital in an IPO where the funds are earmarked for acquisitions

Sometimes also referred to as blank check companies or cash-shells

SPACs were very popular between 2006 and 2008

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Holding Companies (Advantage)Rather M&A, the acquiring company may choose to purchase only a portion (majority) of target’s stock and

act as a holding company

Lower Cost. Acquirer may be able to attain control of a target with a lower cost rather than M&A

Long and complex procedured not required. As we already discussed, M&A process will take various law & government procedures

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Holding Companies (Disadvantage)Multiple taxation. The holding company structure add another layer to the corporate structure. Normally stockholder income is subject to double taxation

The influence still not 100%, it leaves the holding company withother outside shareholders who will have some controlling influence

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Merger & Strategic Management

Mission Objectives

ExternalAnalysis

InternalAnalysis

StrategicChoice

StrategyImplementation

CompetitiveAdvantage

Corporate LevelStrategy

Which Businessesto Enter?

• Vertical Integration• Diversification

• Strategic Alliances

Mode of Entry?

• Mergers & Acquisitions

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TERIMAKASIH