Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
What is a merger? Discuss if it is an effective strategy or not.
Transcribed Image Text:Mergers and Acquisitions
Although the terms are often used interchangeably,
and usually in tandem, mergers and acquisitions are,
by definition, distinct from each other.
• A merger describes the joining of two independent
companies to form a combined entity. Mergers tend
to be friendly; in mergers, the two firms agree to join
in order to create a combined entity. In the live
event-promotion business, for example, Live Nation
merged with Ticketmaster.
Mergers and Acquisitions
• An acquisition describes the purchase or takeover
of one company by another. Acquisitions can be
friendly or unfriendly. For example, Disney's
acquisition of Pixar, for example, was a friendly one,
in which both management teams believed that
joining the two companies was a good idea.
Mergers and Acquisitions
• When a target firm does not want to be acquired, the
acquisition is considered a hostile takeover.
• British telecom company Vodafone's acquisition of
Germany-based Mannesmann, a diversified
conglomerate with holdings in telephony and
internet services, at an estimated value of $150
billion, was a hostile one. It was also the largest
takeover in corporate history.
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