Figure ___ Types of M&A activity and their role on diversification
• Horizontal merger: Two direct competitors which produce the same range of goods and share the same target audience. Companies experience greater success with horizontal combinations which is a result of an increase in the market share.
• Vertical merger: A merger between a company and one of its customers or a company with its supplier (e.g. buyer-seller, client-supplier).
• Conglomerate: takes place when the two combining firms operate in unrelated businesses (unrelated diversification).
• Concentric: occurs when two combining firms are in the same industry (related diversification), but they have no consumer or supplier relationship (e.g. a merger between a bank and a leasing …show more content…
Low interest rates in the international market and the large volumes of cash are the main factors of such increasing trend (Hume A. 2007), the rising of quantity of M&A and volume of transactions is shown in diagram below.
[THE DIAGRAM TO BE INCLUDED]
Diagram ____ Evolution of M&A’s deals
The sharp decline in M&A activity that began in 2008 continued, though at a more gradual rate, in 2009. Global M&A deal volume decreased from 23,589 transactions in 2008 to 19,127 in 2009, at 19% decrease. Similarly, global M&A deal value decreased by 27% to $1.12 trillion in 2009, down from $1.54 trillion in 2008. These numbers stand in stark contrast to the 31,833 transactions with a record $2.69 trillion deal value in 2007. In 2007 world volume of M&A only in the first half exceeded $ 2,5 trillion.
The charts in Appendix 1 are extracted from a market survey hold in 2009, and published on Admedia Partners; they show the expectations of both buyers and sellers towards M&A through the last decade according to the market.
The chart below displays the percentage of estimating M&A transactions over the world per country in 2009 the peak of the economic financial …show more content…
Many companies that concentrate on the expansion and / or diversification, inevitably faced by the question how exactly to enter the new markets and which option to choose whether to develop own production or purchase or to merge an already existing firm.
The acquisitions may be an effective strategic tool to accelerate growth of revenues and market share. Companies understand that the acquisitions may provide access to markets, products, and technologies that might otherwise be available only after many years of significant capital investment even if these advantages are complemented by various risks.
According to the analysis indicated in Financial Times (2000), the 2/3 of mergers and acquisitions are ultimately unprofitable and lead to the sale of previously acquired companies, and even the closure of business. Consequently, when carrying M&A transactions managers should pay special attention to the motives of M&A and the evaluation of potential benefits. In the following part of our thesis we will try to classify the main motives of
• Horizontal merger: Two direct competitors which produce the same range of goods and share the same target audience. Companies experience greater success with horizontal combinations which is a result of an increase in the market share.
• Vertical merger: A merger between a company and one of its customers or a company with its supplier (e.g. buyer-seller, client-supplier).
• Conglomerate: takes place when the two combining firms operate in unrelated businesses (unrelated diversification).
• Concentric: occurs when two combining firms are in the same industry (related diversification), but they have no consumer or supplier relationship (e.g. a merger between a bank and a leasing …show more content…
Low interest rates in the international market and the large volumes of cash are the main factors of such increasing trend (Hume A. 2007), the rising of quantity of M&A and volume of transactions is shown in diagram below.
[THE DIAGRAM TO BE INCLUDED]
Diagram ____ Evolution of M&A’s deals
The sharp decline in M&A activity that began in 2008 continued, though at a more gradual rate, in 2009. Global M&A deal volume decreased from 23,589 transactions in 2008 to 19,127 in 2009, at 19% decrease. Similarly, global M&A deal value decreased by 27% to $1.12 trillion in 2009, down from $1.54 trillion in 2008. These numbers stand in stark contrast to the 31,833 transactions with a record $2.69 trillion deal value in 2007. In 2007 world volume of M&A only in the first half exceeded $ 2,5 trillion.
The charts in Appendix 1 are extracted from a market survey hold in 2009, and published on Admedia Partners; they show the expectations of both buyers and sellers towards M&A through the last decade according to the market.
The chart below displays the percentage of estimating M&A transactions over the world per country in 2009 the peak of the economic financial …show more content…
Many companies that concentrate on the expansion and / or diversification, inevitably faced by the question how exactly to enter the new markets and which option to choose whether to develop own production or purchase or to merge an already existing firm.
The acquisitions may be an effective strategic tool to accelerate growth of revenues and market share. Companies understand that the acquisitions may provide access to markets, products, and technologies that might otherwise be available only after many years of significant capital investment even if these advantages are complemented by various risks.
According to the analysis indicated in Financial Times (2000), the 2/3 of mergers and acquisitions are ultimately unprofitable and lead to the sale of previously acquired companies, and even the closure of business. Consequently, when carrying M&A transactions managers should pay special attention to the motives of M&A and the evaluation of potential benefits. In the following part of our thesis we will try to classify the main motives of