Factors to look before suitable

Acquisition
Strategic Fit
One of the key concepts associated with
mergers and acquisitions is strategic fit
Companies operating in the same sector
must have some degree of alignment in
terms of competitive situation, strategy,
organizational culture and leadership style

Market Share and Branding

Fierce protectiveness over market share

exists between competitors operating

within the same sector.
When the opportunity to combine

operations presents itself, however,

company leaders see a probable growth in
market share on the horizon

Check your own liquidity and

financial health
Before you enter any transaction, says

Burmeister, determine if you have the

financial wherewithal by performing a
thorough financial health check.
Since the recession, most organizations

have shifted their focus away from profit

and loss statements and towards liquidity,
he says

Make sure your people can see clearly

Before closing a deal, Burmeister says,

youll also want to ensure you have a team

in place with the experience to assess a
transaction, complete an investment,
forecast its performance and tolerate
sensitivities around the results.

Define your goals and success

factors
In putting together your M&A strategy, you should

analyze both your competitive position as well as

your future objectives.
That means understanding what youre doing

with your business, where you want to go and

what you value most, says Burmeister
Is your goal to increase market share?
Do you want to enter markets contiguous to the
ones you already play in?
Do you want to acquire new products, processes
and intellectual capital?

Consider M&A candidates

Now that you know what you want out of a

merger or acquisition, its time to begin the

search for the right fit. But what factors
should come into your screening process?
One is integration feasibility, meaning:

What are the organizational and

operational challenges of integrating
them? says Burmeister.

Plan and execute due

diligence
When it comes time to evaluate a potential

deal, youll need to do more than just some

simple math or even an audit lite.
When done properly, due diligence should

test the strategic fit of the acquisition,

says Burmeister.

Create a transition team

Major transitions require strong leadership;

it sets the tone for savings and

efficiencies, says Burmeister.
Thats why it is critical to create a

transition steering committee and a

functional team

Carefully plan and perform

the integration
When its finally time to merge the

operations, processes and cultures of the

two companies, you should, focus on
revalidating all of the plans you have
developed since the deal was first
considered, says Burmeister

Four Cs
Compensate: If you want existing management

to stay, make their targets achievable and

compensate appropriately.
Communicate: People on both sides of the
transaction should be completely aware of whats
going on to help quell rumors and paranoia.
Care: How you react to challenges can make all
of the difference
Cull: If you must say goodbye to any members of
management, make your decisions quickly, but
carefully.

Dilutive acquisition (FAHAD)

A takeovertransaction that will decrease the

acquirer's EPSif additional shares are issued

to pay for the acquisition
Dilutiveacquisitiondecreaseshareholders

value and should thus be avoided

An acquisition isaccretivewhen the combined

(pro forma) EPS is greater than the acquirers

standalone EPS

Types
An acquisition is accretive when the
combined (pro forma) EPS is greater than
the acquirers standalone EPS
Accretion: When pro forma EPS > Acquirers

EPS
Dilution: When pro forma EPS < Acquirers EPS
Breakeven: No impact on Acquirers EPS

Factors can lead to the dilution of

EPS in an acquisition( Aaqib)
Higher EPS will always translate into

higher price, making accretive deals good

for acquiring company stockholders
Increase in EPS, the stock price of the

combined company will also fall

The targets Price/Earnings ratio is greater

than the acquirers

Low P/E acquires a company with a

high P/E
If you are funding a deal with cash, the

deal will almost always be accretive

because the income you are generating
from cash
The deal will be accretive if the equity

earnings that you generate from the

acquired company exceed the interest
expense

Affect On Market Price

EPS will often influence the market price

of its stock, the relationship is rarely

inverse.
The company's EPS is determined by

dividing the earnings by the number of

outstanding shares

Takeovers (Akhtar Ali)

In business, a takeover is the purchase of

one company (the target) by another (the

acquirer, or bidder).
Friendly takeover;
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

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,

and if the bidder continues to pursue it or
the bidder makes the offer

Reverse takeover
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

Backflip takeover
Is any sort of takeover in which the

acquiring company turns itself into a

subsidiary of the purchased company

Takeover Defenses
Poison Pill Defense

This defense is controversial, and many countries

have limited its application
Golden Parachute
The Golden Parachute is a provision in a CEO's
contract. It states that he will get a large bonus in
cash or stock if the company is acquired
Shareholders Rights Plan
The most common form of takeover defense is the
shareholders' rights plans, which activates at the
moment a potential acquirer announces its
intentions

Takeover
Poison pill

While the poison pill defense may help ward

off unwanted suitors, it also makes it more
difficult for shareholders to profit from the
announcement of a takeover
Voting Rights Plans
Targeted companies may also implement a
voting-rights plan, which separates certain
shareholders from their full voting powers at
a predetermined point

Staggered Board of Directors

Clauses involving shareholders are not the

only escape routes available to targeted
companies. A staggered board of directors (B
of D), in which groups of directors
Greenmail
A company may also pursue the greenmail
option by buying back its recently acquired
stock from the putative raider at a higher
price in order to avoid a takeover

Takeover
White Knight

If a determined hostile bidder thwarts all

defenses, a possible solution is a white
knight, a strategic partner that merges with
the target company
Acquiring the Acquirer

Ironically, a takeover defense that has been

successful in the past, albeit rarely, is to turn
the tables on the acquirer and mount a bid to
take over the raider

Takeover
Triggered Option Vesting

A triggered stock option vesting strategy for

large stakeholders in a company can be used
as a defense, but it rarely benefits anyone
involved

Why management want to

resist?
Goodwill, often paid in excess for the

acquisition
Reduced competition and choice for
consumers in oligopoly markets (Bad for
consumers, although this is good for the
companies involved in the takeover)
Likelihood of job cuts
Cultural integration/conflict with new
management
Hidden liabilities of target entity
The monetary cost to the company

References

https://en.wikipedia.org/wiki/Conglomerate_

merger
http://legaldictionary.net/conglomeratemerger/
http://smallbusiness.chron.com/horizontalmerger-vertical-merger-60981.html
https://www.americanexpress.com/us/small
-business/openforum/articles/7-steps-to-asuccessful-ma-a-small-business-guide/