Assignment

on

‘Merger & Acquisition’

Course Name: International Business

Course Code: MGT- 405

Prepared for:

Prepared by:

Date of submission: 10th January, 2016

Definition of Merger:

The definition of merger in general and in finance can be stated as follows:

In general, “Merger is absorption of one or more companies by a single existing company”.

In finance, “Merger is an act or process of purchasing equity shares (ownership shares)of one or more companies by a single existing company”. Merger is done on a permanent basis. Generally it is done between two companies. However it also can be done among two or more companies.

Definition of Acquisition:

An acquisition is the purchase of all or a portion of a corporate asset or target company. A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm.

Types of Merger and Acquisition:

Five types of Mergers and Acquisitions are seen available in Business arena. These are following:

Conglomerate Merger: A merger between firms is involved in totally unrelated business activities. There are two types of conglomerate, pure and mixed.

Horizontal Merger: A merger occurring between companies in the same industries. The two companies combine their operations and gains strength in terms of improved performance, increased capital, and enhanced profits.

Product Extension Merger:A product extension merger takes place between two business organizations that deal in products that are related to each other and operate in the same market.

Vertical Merger: A merger between two companies producing different goods and services for one specific finished product.

Market Extension Merger: A market extension merger takes place between two business organizations that deal in the same products but in the separate markets

Trends of Merger and Acquisition:

As the trends in merger and acquisition accelerating globally, the shadows are begin to fall on the need of financial services outsourcing. Investment banks & private equity firms started to profess global merger and acquisition. 

According to Thomson Reuters in half of 2011 M&A deals are mostly associated to energy power and financial services sectors. Announced M&A deals globally in the second quarter

totaled $611 billion, down 23% compare to first quarter in which big deal such as AT&T's $39 billion acquisition of T-Mobile USA took place.. In India M&A volume has soared up to $23.4 billion in half of 2011 slightly less the recorded volume announced in the same period of 2007. The United Kingdom has come forth as the top acquirer into Indian market followed by United States & Germany with deals worth $ 15 billion in which the significant deal of $9 billion realized by British Petroleum in February against the 23 oil and gas blocks of Reliance Petroleum is also witnessed. 

Table: Quarterly comparison of global M&A value is given below:

Q/value 2011 2012 2013

Q1 value 613.3 460.5 570.5Q2 value 580.9 560.5 653.7Q3 value 587.7 516.9 542.9Q4 value 469.3 750.9 448.0total 2251.2 2288.8 2215.1

Above table presents a comparative quarterly scenes of global merger and acquisition from 2011-2013. The annual value of M&A for 2011, 2012, 2013 was respectively 2251.2 bn., 2288.8 bn., and 2215.1 bn. 2011 Q1 started with higher value and ended with lower value. On the contrary, 2012 experienced lower value in the Q1 but the peak was Q4. 2013 had mixed experiences in terms of M&A value, it onset with 570.5 bn., peak was in Q2- 653.7 bn., but consecutive fall in Q3 and Q4. Therefore 2012 had the highest annual value and Q4- 2012 was the highest quarterly value.

Table of number of total bank M&As (domestic and international bank)

1995 1996 1997 1998 1999 First half 2000

Total bank M&As 326 343 319 434 497 234Of which domestic 275 293 270 383 414 172Of which within EEA 20 7 12 18 27 23Of which with third country

31 43 37 33 56 39

In summary

Domestic M&As mainly occur between smaller institutions, indicating a mop-up of excess capacity.

Consolidation of smaller institutions has been a phenomenon during the whole period.

M&As of large institutions are increasing both in absolute and relative terms, thereby affecting the market structures in some Member States.

Far fewer international bank M&As have taken place than domestic bank M&As.

References

eProjekts,. Mergers and Acquisitions Archives - eProjekts. Retrieved 9 January 2016, from

http://www.eprojekts.com/category/mergers-and-acquisitions/

Ghani,. Recent trend of Merger & Acquisition in the Global Economy. Evancarmichael.com.

Retrieved 9 January 2016, from

http://www.evancarmichael.com/library/azam-ghani/Recent-trend-of-Merger--

Acquisition-in-the-Global-Economy.html

Mbda.gov,. 5 Types of Company Mergers | MBDA Web Portal. Retrieved 9 January 2016,

from http://www.mbda.gov/blogger/mergers-and-acquisitions/5-types-company-mergers

UKEssays,. Making A Cross Cultural Merger Management Essay. Retrieved 9 January 2016,

from http://www.ukessays.com/essays/management/making-a-cross-cultural-merger-

management-essay.php