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THE JOURNAL Mergers and Acquisitions listed over gets t 5,000 mergers involving U.S. corporations in 2000, and the total value of the companies acquired was $1.7 trillion. The year included the announcement of U.S’s largest merger, as AOL and Time Warner its bus agreed to form a company valued at $350 billion, group
What are the likely gains from mergers? How can managers
calculate their benefits and costs? How can target companies defend themselves
against unwelcome bidders? Who gains and who loses in mergers? This book
considers these questions[3]
Rising earnings pressures, accelerating global competition, and increased
consolidation are driving unprecedented levels of corporate collaboration
through mergers, acquisitions, and strategic alliances.
When two businesses combine their activities, the combination may take the form of an acquisition (also called a takeover) or a merger (also called an amalgamation). The primary purpose of any combination should be to increase shareholder wealth, such an increase normally coming from the effects of synergy.
It must be recognised that in practice the synergistic gains anticipated from a combination are often disappointing. This may be because managers generally prefer to grow their businesses through acquisition rather than organically. Although the Netscape/AOL, Exxon/Mobil, Daimler/Chrysler, and other headline making “marriages” tend to focus attention on the value of mergers, in many situations alliances are preferable alternatives for companies looking to achieve strategic synergies. The numbers speak for themselves. Over the past years, for example, IBM has formed approximately 800 alliances, AT&T 400, and Hewlett Packard 300.
Such strategic alliances–whether with competitors, suppliers, vendors, or complementary partners–are frequently the most efficient and effective means for achieving immediate access to the capital, talent, distribution channels, or manufacturing capabi1ities essential for maintaining market leadership. Other considerations–including sobering M&A failure rates–also lead many companies to prefer alliances. ..though a major reason for seeking merger-related synergies is improved financial performance, a recent study by Mercer Management Consulting showed that only about half of the companies formed through mergers exhibited superior performance with in their industries.
Successful collaboration through strategic alliances hinges on spending advance time comparing the potential value of the alliance against that of a full-fledged merger or acquisition. Anticipating and avoiding inherent risks, carefully managing day-to-day alliance operations, and dissolving ongoing partnerships as soon as their costs out weigh their value are key success factors.
In this book I will discuss further the meaning of synergy and explain the various explanations for synergistic gains , Explain why many business combinations do not in fact realize the gains that were hoped from them. I will also discuss the blend of assets comprising the consideration on an acquisition. and identify relevant rules from the City Code which impact on any given situation
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