ipl-logo

M & A Case Study

2094 Words9 Pages

This paper is devoted to the analysis of the effectiveness of divestment deals. The research evaluates the change in price for the target and acquirer companies due to the announcement of the deal. The paper consists of the following parts: introduction, main part and conclusion. The introduction will cover the background of the research, the problem statement and the professional significance. The main part will include the literature overview, cover the methodology of the analysis and the anticipated results. In the final part, conclusion, the anticipated results will be stated in relation to what was stated in the introduction.

Introduction
One of the types of M&A deals is a divestment. A divestment refers to the separation …show more content…

The authors discuss two hypotheses which might explain spin-offs: (1) a firm with diverse operating units may divest a subsidiary allowing both the parent and subsidiary to use unique sets of contracts in which each has a comparative advantage, and (2) the gains are simply expropriations from senior security holders, such as bondholders and preferred stockholders, to common stockholders. Examining a sample of 53 senior securities of 31 divesting firms no support is found for the expropriation hypothesis. Instead the results are consistent with the contracting efficiency …show more content…

Whereas usually two companies merger into one through an M&A deal, divestment results in a separation of a company into several companies. Thus, the divestment deal is considered effective if the value of two companies after the separation is higher than the value of a company before the divestment.
Pab < Pa + Pb
The research studies if the divestment deals are an effective mean of value creation in real life and is carried out using econometric analysis.

The efficiency evaluation of divestments is conducted using an event-study method. Event-study conduction implements a review of a sample of deals. This includes the analysis of prices of acquirer and seller companies before the announcement of a divestment, right after the announcement and after the divestment is completed.

A sample of deals contains information about the acquirer and target names, deal value, seller, target and acquirer stock prices in different periods before and after the announcement and the completion of deal.

Results anticipated
According to the literature revised, the return from the divestment is expected to be positive. The value of the increase depends on the quality of the target. Higher return is expected when the business is underperforming or the company is overdiversified. The increase in price is anticipated for the seller and target or acquirer

Show More
Related
1214 Words | 5 Pages

Over the past ten years, total number of outstanding shares has dropped 40%. The company is very committed to investing money back into own stock thus increasing share price and

Read More
563 Words | 3 Pages

Relevant Facts: Nurofen, the pain-relief medication is made by Reckitt Benckiser Australia, a multinational company. The company was found misleading customers for all its specific range that contained the same active ingredient ibuprofen lysine 342mg and was seen to have same effect. The product was advertised the products as been targeting back pain, period pain and tension headaches. The Company was fined $1.7m for misleading customers on range of ‘specific pain’ relief contravening Australian Consumer Law has been brought forward by ACCC. The ACCC had asked federal court to impose $6 million fine.

Read More
1061 Words | 5 Pages

The Calaveras Vineyard, established as early as in 1883 in California initially aimed at making wine for the Catholic Church. The man behind this family owned business was Esteban Calaveras. Over the years the ownership has been changing but improvements in brand quality and standards remained the key to success. Technological changes also improved market positions chiefly through capital improvements. New strategies helped the company secure good positions regarding cash flow.

Read More
882 Words | 4 Pages

Process and tools Target Corporation uses tolls and process for product safety and quality assurance. The company assesses a program for risk –based product safety and quality at every stage in the product life cycle, from development through the life of brand product. Target global team implement a program across 36 countries and 2228 factories producing target product, during the process will require independent third-party testing to validate safety and quality before the guests purchase product. the vendor in the company are expected to employ best practices, including clearly defined and well-documented manufacturing and quality processes including staff training , and record keeping. What does the TC required to do the job?

Read More
2272 Words | 10 Pages

Question 1 Several factors have been proposed as providing a rationale for mergers. Among the more prominent ones are (I) tax considerations, (2) diversification, (3) control, (4) purchase of assets below replacement cost, and (5) synergy. From the standpoint of society, which of these reasons are justifiable? Which are not?

Read More
1937 Words | 8 Pages

This creates shareholder value by allowing the return to be stimulated by the assets and equity of the company. The return on the assets and equity of the company can be directly correlated with operational efficiency, return on investments, and overall optimal business decisions. SNC was able to continually create value in each of the three phases through pre and post strategic financial analysis that enabled leadership to make beneficial decisions. Leadership learned that although there are many decisions to make within the short term, a vision of long-term sustainable growth is critical to the success of a business. If management had the ability to redo the three phases, a similar approach would be taken.

Read More
1327 Words | 6 Pages

Exhibit 5 shows that The Buffalo News has experienced a quite slow decrease since 2000, which indicated the firm has enough experience to manage MEG’s newspaper business well. Also, Buffet will become shareholder after the purchase, in result of this MEG will get more enterprise resource from Buffett. Secondly, this bid is beneficial to Marshall Morton’s own career development. To sell the money-losing business will help his company more concentrate on the profitable business. Because of the profit growth in the future, Marshall Morton’s reputation will increase as well.

Read More
1910 Words | 8 Pages

This goal of the partnerships, mergers and acquisitions will welcome the professionalism in the management of Barclay’s affairs. Through mergers and acquisitions, it will be able to reduce the unfavourable competition and reduce cost of initial set-up that is more expensive than rebranding and acquired firm. Partnerships reduce costs by providing economies of scale. Mergers, on the other hand, reduce risk of venturing into new markets. These engagements allow firms to leverage risk on their combined assets thus lowering the risks associated with doing business.

Read More
3388 Words | 14 Pages

This compare and contrast paper will explore the history and development of these two corporate giants; conduct a strategic and financial analysis of each company; and compare and contrast the executive leadership, corporate strategy, acquisitions and divestments of each. The future direction of the companies over the next three to five

Read More
713 Words | 3 Pages

Many mergers tend to fail and many others succeed. A merger is the combining of assets and operations, usually between two similar sized companies, in an agreement to join together. Mergers can cause bankruptcy, job losses, less choices, and even a breakup. On the other hand, they have many advantages such as, increased market share, lower cost of production, and higher competitiveness. Most mergers can be highly risky but with the presence of knowledge and intuition they can be successful.

Read More
1368 Words | 6 Pages

Organizations will be more Induce to expand and take risks when economic conditions are right, low interest rates and increase demand.

Read More
1972 Words | 8 Pages

Introduction The company selected for this research is McDonald’s Australia Holdings, a patented public company in Australia. The company specializes in food and beverage products such as burgers, coffee, sandwiches, McCafe beverages, and soft drinks, among others. The primary activity of the company, which generates most of its revenues from food and beverage services, entails establishing and operating a chain of family restaurants that offer quick services throughout Australia. While the company owns and runs a smaller number of the McDonald’s Australia Holdings’ restaurants, a larger number of the restaurants is owned and ran by franchisees, who shell out the company’s service fees and rent (Buchan, 2012). The 2013 annual revenue of the

Read More
1870 Words | 8 Pages

1.0 INTRODUCTION In an economy, there exists different market structures to accommodate different industries and firms. This study will be made to understand in further depth the market power of different market structures, and in particular an example of using case studies of agricultural sector of the French markets to explain how an ideal perfectly competitive market works. This will then be further strengthened with several references linked to the case study. 1.1 Monopoly market

Read More
815 Words | 4 Pages

Motilal oswal securities Ltd The Motilal oswal ltd company was the parent company of the Motilal oswal securities ltd, it was the subsidiary company. Motilal Oswal Company was established by Motilal oswal and Raamdeo agarwal in 1987 and gets the membership from the BSE. It got it final certificate of registration approval in the year 2010 from the securities and exchange board of India regarding the setup and expansion of the business of mutual funds in the country. Motilal oswal securities ltd was incorporated in the year 1994 and its main business is stock broking and wealth management. Motilal Oswal Company has 99.95 % holdings previously which became 100 % holdings In Motilal securities ltd .It was one of the subsidiary company of the

Read More
3102 Words | 13 Pages

EXECUTIVE SUMMARY Mahindra and Mahindra, the business sector pioneer in multi-utility vehicles in Asian nation. The corporate began creating business vehicles in 1945. Mahindra is that the pioneer by a long shot in business vehicle furthermore the second biggest inside of the voyager vehicle market. The corporate is that the world 's 6th biggest medium and huge business vehicle creating. Mahindra is best celebrated for utility vehicles and tractors in Asian nation, Its car division, the organization 's most established unit (established in 1945), makes jeeps and three-wheelers (not explorer "auto rickshaws," however utilitarian conveyance and flatbed incarnations).

Read More

More about M & A Case Study

Related Topics

Open Document