Merger and Acquisitions Meaning and Importance.
                     Merger and 
Acquisitions
: Meaning 
and 
Importance
What is Mergers 
& Acquisitions?
• Mergers and acquisitions (M&A) 
are defined as consolidation of 
companies. 
• Differentiating the two terms, 
Mergers is the combination of 
two companies to form one, 
while Acquisitions is one 
company taken over by the 
other.
Source: www.edupristine.com
Reasoning 
behind M&A 
• The reasoning behind M&A 
generally given is that two 
separate companies together 
create more value compared to 
being on an individual stand. 
Source: www.edupristine.com
How M&A take 
place?
• by purchasing assets
• by purchasing common shares
• by exchange of shares for 
assets
• by exchanging shares for 
shares
Source: www.edupristine.com
Types of Mergers 
and Acquisitions
• Merger may take two forms: 
merger through absorption or 
merger through consolidation. 
• From a legal perspective, there 
are different types of mergers 
like short form merger, 
statutory merger, subsidiary 
merger and merger of equals.
Source: www.edupristine.com
Reasons for Mergers 
and Acquisitions
• Financial synergy for lower cost 
of capital
• Improving company’s 
performance and accelerate 
growth
• Economies of scale
• Diversification for higher 
growth products or markets
Source: www.edupristine.com
Reasons for Mergers 
and Acquisitions 
cont.
• Strategic realignment and 
technological change
• Tax considerations
• Under valued target
• Diversification of risk
Source: www.edupristine.com
Important 
considerations
• The company must be willing 
to take the risk and vigilantly 
make investments 
• To reduce and diversify risk, 
multiple bets must be made
Source: www.edupristine.com
Stages involved in 
any M&A
• Phase 1: Pre-acquisition review: 
this would include self 
assessment of the acquiring 
company.
•  Phase 2: Search and screen 
targets: This would include 
searching for the possible apt 
takeover candidates. 
Source: www.edupristine.com
Stages involved in 
any M&A cont.
• Phase 3: Investigate and 
valuation of the target: Once 
the appropriate company is 
shortlisted through primary 
screening.
• Phase 4: Acquire the target 
through negotiations: Once the 
target company is selected, the 
next step is to start 
negotiations.
Source: www.edupristine.com
Reasons for the 
failure of M&A 
• Poor strategic fit
• Poorly managed Integration
• Incomplete due diligence
• Overly optimistic
Source: www.edupristine.com