Kommilitonen im Kurs Merger & Acquisition an der Universität zu Köln. erstellen und teilen Zusammenfassungen, Karteikarten, Lernpläne und andere Lernmaterialien mit der intelligenten StudySmarter Lernapp. Jetzt mitmachen!
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Merger & Acquisition
Certain Tasks of Corporate Development Organization (CDO) in large firms (3)
1. Strategic Tasks
- inform and advise the firm on the transaction opportunities to enhance strategic vision
- inform and advise on potential strategic course corrections
2. Operational Tasks
- opportunity identification, planning and structuring of transactions, valuation, and negotiation
3. Coordination tasks
- financial diligence, legal, tax diligence, and tax structuring
Merger & Acquisition
How are CDOs organized? (5)
• Multi-disciplinary team
• 3-8 FTEs
• Report to CEO or CFO
• Generate about 80% of deal opportunities
• Contribute about 50% of M&A tasks (mostly planning & transaction phase)
Merger & Acquisition
Merger Definition (2)
• The consolidation or combination of one firm with another [A+B=A’ or C].
• The shareholders of the combining firms often remain as joint owners of the combined entity.
-> e.g. Daimler & Chrysler
Merger & Acquisition
Acquisition Definition (2)
• The purchase of one firm of another (or of parts of it) [A+B=A’].
• The acquired firm’s shareholders stop to be owners of that firm.
-> e.g. Bayer & Monsanto
Merger & Acquisition
Divestiture Definition (2)
• The sale of a firm (or parts of it) to another firm [A-B=A’].
• The selling firm’s shareholders stop to be owners of that firm (or of the parts sold).
-> e.g. Bayer & BMS (Covestro)
Merger & Acquisition
Drivers of M&A waves (5)
Merger & Acquisition
Who should benefit from an acquisition, and how? (4 stakeholder)
Firm A should acquire Firm B if the stakeholders in both firms will be better off.
For shareholders:
Increase in share value, i.e. the combined value of A+B > the stand-alone value of A + stand-alone value of B + the benefits - cost of executing the merger or acquisition
Bondholders:
Reduction of default risk
Management:
Job security and prospects
Employees:
Job security and prospects
Merger & Acquisition
Effective synergy management
(value creation) (3)
• finding a partner with high potential synergies
• Effective synergy measurement
• Effective integration management
Merger & Acquisition
Synergy Management Pitfalls: How to identify and avoid them (1. Mirage)
-> When? Where? What? Why? (4) How to avoid? (3)
When?
Due-diligence
Where?
Potential synergy
What?
Overestimating of synergy value
Why?
- Agency conflicts
- Hubris (Überheblichkeit)
- Inter-firm causal ambiguity
- Ineffective assessment models
How to avoid?
- Assess the “expected synergy” carefully
- Use a risk-management approach for board-level discussion
- Conduct a careful analysis of the reasons for an M&A
Merger & Acquisition
Synergy Management Pitfalls: How to identify and avoid them (2. Gravity Hill)
-> When? Where? What? Why? (4) How to avoid? (3)
When?
Due-diligence
Where?
Integration costs
What?
Overestimation the synergy value / Underestimating the integration costs
Why?
- Lack of attention
- Hubris
- Inappropriate background of the management involved
- High costs of coordination
How to avoid?
- Build cross-functional teams from technical, operational and financial positions
- Carefully assess the “integration costs”
- Obtain M&A insurance
Merger & Acquisition
Synergy Management Pitfalls: How to identify and avoid them (3. Amnesia)
-> When? Where? What? Why? (4) How to avoid? (3)
When?
Post-merger integration
Where?
Realized synergy
What?
Failure to achieve synergy value
Why?
- Lack of attention
- Intra-firm causal ambiguity
- Cultural differences
- Absence of integration plans
How to avoid?
- Pay attention to the action plan
- Carefully analyze and organize the cultural integration
- Select the correct integration approach
Merger & Acquisition
Do mergers and acquisitions pay off for employees? (3)
• Increased risk of lay-off
• Remaining employees have greater career prospects in a larger firm
• Remaining employees may benefit from improved firm competitiveness (greater job security)
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