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FHNW Fin Acc 3 Merger Acquisition V004
Financial Accounting
Fachhochschule Nordwestschweiz
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UAS Northwestern Switzerland Financial Accounting 3 BSc International Management Version V004 / Marcel Hirsiger 1 UAS Northwestern Switzerland Financial Accounting 3 BSc International Management Financial Accounting 3 – Merger & Acquisition MODULE INTRODUCTION Version V004 / Marcel Hirsiger 2 UAS Northwestern Switzerland Financial Accounting 3 BSc International Management Module Overview • • • • • • • M&A Transactions Company Value, Share Value Adjusting Values Absorptions, Mergers Acquisitions Restructuring, Liquidation Spin-Off, Split-Up Version V004 / Marcel Hirsiger 4 UAS Northwestern Switzerland Financial Accounting 3 BSc International Management Module Evaluation • Written exam at the end of the semester • Length: 60 minutes • Aids: calculator, dictionary. Closed books. Version V004 / Marcel Hirsiger 5 UAS Northwestern Switzerland Financial Accounting 3 BSc International Management Financial Accounting 3 – Mergers & Acquisitions M&A BASICS, KEY TERMS Version V004 / Marcel Hirsiger 7 UAS Northwestern Switzerland Financial Accounting 3 BSc International Management History of M&A M&A Waves in USA (Number of transactions with US companies involved) 1st wave 1897 - 1904 Monopolies 2nd wave 1919 - 1929 Vertical integration, new anti-trust laws 3rd wave 1962 - 1969 Diversification, new "conglomerates" 4th wave 1983 - 1989 Liberalization, deregulation 5th wave 1992 - 2000 Globalization, internet boom ("new economy") 6th wave 2003 - 2008 Globalization, private equity Year Source: nzz/kein-uebernahmefieber-trotz-aktien-hausse-1.18091041 [last Version V004 / Marcel Hirsigeraccessed: Feb 16, 2016], transl. MH 8 UAS Northwestern Switzerland Financial Accounting 3 BSc International Management Mergers and Acquisitions A B A A C Absorption Combination Merger Version V004 / Marcel Hirsiger B A B A B Acquisition 10 UAS Northwestern Switzerland Financial Accounting 3 BSc International Management Key Reasons for M&A 1. M&A can be the most effective and efficient way to enter a new market, to add a new product line, or increase distribution reach. 2. M&A are more and more strategically motivated. One key trend is to acquire a company to access today`s “knowledge worker” and to obtain the intellectual property. Many technology companies – such as Cisco, Google and Yahoo! – pursue acquisitions to get the employees in addition to the products and intellectual property. 3. The financing behind the deals are sounder and more secure than ever before. Thirdparty financing is more readily available. The number of financing sources has continued to grow giving in particular middle market companies more capital than in the past. Version V004 / Marcel Hirsiger 11 UAS Northwestern Switzerland Financial Accounting 3 BSc International Management Key Reasons for M&A (continued) 6. Many deals are fuelled by the need to spread the risk and cost of: – Developing new technologies, such as in the communications and aerospace industries; – Research into new medical discoveries, such as in the medical device and pharmaceutical industries; – Gaining access to new sources of energy, such as in the oil and gas exploration and drilling industries. 7. The global village has forced many companies to explore M&A to develop an international presence and expanded market share. This market penetration strategy is often more cost-effective than trying to build an overseas operation from scratch. 8. Many recent M&A come about with the recognition that a complete product or service line may be necessary to remain competitive or to balance seasonal or cyclical market trends. Transactions in the retail, hospitality, food and beverage, entertainment, and financial services industries have been in response to consumer demand for “one-stop-shopping”. Version V004 / Marcel Hirsiger 13 UAS Northwestern Switzerland Financial Accounting 3 BSc International Management Key Reasons for M&A (continued) 9. Many deals are driven by the premise that it is less expensive to buy brand loyalty and customer relationships than it is to build them. Buyers are paying a premium for this intangible asset on the balance sheet, which is often referred to as goodwill. In today`s economy, goodwill represents an asset that very important but which is not adequately reflected on the seller`s balance sheet. Veteran buyers know that long-standing and other strategic relationships that will be conveyed with the deal have far greater value than machinery and inventory. 10. Some M&A happen out of direct competitive necessity. If an owner of a business decides to sell her or his business, every potential buyer realizes that their competitors may be the true target. Version V004 / Marcel Hirsiger 14 UAS Northwestern Switzerland Financial Accounting 3 BSc International Management Buyer Motivation for M&A • • • • • • • • • • • • Desire to grow Opportunity to increase profits Desire to diversify Desire to realize synergy-effects Buying up competitors Using surplus capital Achieving new distribution channels Diversify into new products or geographic markets Particular people, existing business or assets are needed Access to new or emerging technologies Need to key people or resources Strategic fit between the parties` current operations Version V004 / Marcel Hirsiger 16 UAS Northwestern Switzerland Financial Accounting 3 BSc International Management Facebook Takes Over WhatsApp Source: ft/intl/cms/s/0/44d4fc72-99b2-11e3-b3a2-00144feab7de.html#axzz3SpX5jdhU [accessed 26 February, 2015] Version V004 / Marcel Hirsiger 17 UAS Northwestern Switzerland Financial Accounting 3 BSc International Management Version V004 / Marcel Hirsiger 19
FHNW Fin Acc 3 Merger Acquisition V004
Kurs: Financial Accounting
Universität: Fachhochschule Nordwestschweiz
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