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The paper “Mergers and Acquisitions: Hostile Mergers” focuses on a consolidation of two same size companies, which creates a new company. An acquisition is when a company buys another company and a new company will form. There are different types of merger and acquisition…
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The hostile merger is that kind of merger, where the management of the one company is forcefully acquiring the other company by replacing its management and other operation sectors. In this case, the Mittal Steel may do not forced Arcelor to change its management or operation system, but they pay more than the actual share price of Arcelor. The offer made by Lakshmi Mittal is the highest bid made in the steel industry. The offer explained four Mittal shares with 35.25 euro will be exchanged for every five shares of Arcelor. As a result of the value of Arcelor’s share valued at 28.21 euro, which implicates that it will involve a 27% premium over the closing price on the stock market from the previous day. This brings the conclusion that the merger between Mittal and Arcelor companies is an example of a Hostile merger. Case study- ArcelorMittal Mittal Steel Company and Arcelor In the year1978, the steel company was formed as “Ispat International” by the father of Lakshmi Mittal. Different disagreements between the father and son made a separation in the year of 1995. It’s headquartered in Rotterdam, Netherlands. The company grows high within a few years by different investment and acquisition throughout the world. Among which, the most controversial merger was with Arcelor. Before the acquisition, Arcelor was the largest steel producer in terms of turnover and second largest in terms of steel output, whereas Mittal Stand first in terms of output. The CEO of Arcelor is Guy Dolle, and it’s headquarter is situated in Luxembourg City (Kumar, 2012). 1. Strategy In recent years few industrial mergers has captured the imagination of the business world like Arcelor and Mittal Steel. These two companies are the largest complementary company in terms of steel production (Rao and Sivaramakrishna, 2009, p. 3). In the year 2006 Mittal Steel asked the shareholders of Arcelor to create the world’s first steel producer, which will produce steel more than 100 million tonne plus. Mittal offered $22.7 billion to the shareholders of Arcelor as a real value. This will be split as 75% of Mittal’s shares and 25% in terms of cash (Zabihollah, 2011, p. 72). However soon it creates a big controversy. Now the question is come up why Mittal Steel chooses and offers Arcelor for their acquisition. It offers several answers like- Arcelor is an attractive target. Mittal had only 34% merger revenue from Europe, whereas Arcelor had 71%, which is near about the double amount which Mittal had. In terms of the production unit of steel, Bachelor was the strongest competitors for Mittal steel (Nancy, 1999, p. 4) Why the changes implemented Both the companies wanted to achieve the number one position in the steel industry, which is not possible if they try it individually. These two companies want to achieve the economy of scale. However, there are different factors are come the obstacle in terms of growth for these companies. Competitors are one of the main factors. Abolishment of competitors will help them to achieve the economy of scale. According to the experts from the year 2006, there was a high demand for the steel industry. However it will be not possible in one-way growth for the companies, changes were necessary for them. In terms of volume as well as revenue, both the companies were very attractive to each other.
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... easily compete with the rest of the smaller players within the industry. In the end, the smaller players within the same industry will not be able to tolerate producing its products and services at a much high operational cost versus the low market price. When smaller companies decided to declare bankruptcy, the competition within the domestic market will be less on the part of the bigger company.
Bourke, E., Laidlaw, G., & Woods, I. (2001). Achieving Post-Merger Integration. Financial Services , 10 - 13.
Cartwright, S., & Cooper, C. (1992). Mergers & Acquisitions: The Human Factor. UK: Butterworth.
Conyon, M., Girma, S., Thompson, S., & Wright, P. (2002c). Do HostileMergers Destroy Jobs? Journal of Economic Behavior...
...Advance Corporate Finance
Theoretically mergers and acquisitions should be value creating for the shareholders of both the offeror and offeree companies. You are required to critically evaluate whether this is the case in practice
The development of commercial activities around the world has led to the need for the creation of various schemes of cooperation among the firms that operate within the global market in order for these firms to face successfully the extremely hard market competition. Regarding this issue, it is noticed by Schraeder et al. (2003, 511) that ‘mergers and acquisitions are becoming a strategy of choice for organizations attempting to maintain a competitive advantage’. From another point of view...
...The role of financial management in successful business acquisitions and mergers Introduction Advice pertaining to investment banking with in mergersand acquisitions forms an integral park of the job of a banker and will be adding momentum towards the closing and coordination of the plethora of events and actions which need to be reviewed before any such transaction. This will involve giving strategic advice and help in tackling the “complex beast” of Mergers and Acquisitions. From a financial perspective mergers and acquisitions have become an attractive business option in the modern corporate practice as a means of achieving increase in growth, diversification, and the ultimate goal of economies of scale .Many companies also have...
...On Mergers and Acquisitions Introduction There is more to the story of the beautiful princess kissing a handsome prince hidden in a toad’s body. There are many unlocking potentials and interconnecting events before the real thing should have come out. The points we have to deal: Why do corporations go on a merger? Why despite the high rate of failure in mergers and acquisitions corporations still insist in consolidation? Many still jump on the bandwagon.
Donald C. Spitzer, the U.S. national partner in charge of the Global Financial Strategies (SM) practice of KPMG LLP, the U.S. accounting, tax and consulting firm, says: “More than 8 in 10 deals fail to enhance shareholder value because of poor planning or execution or both, yet...
...The Survival of Cadbury and Section # of This essay is about the survival of Cadbury from the hostile takeover attempt of Kraft. The paper discusses the individual growth prospects of the two companies and then the business models of the Cadbury and Kraft are compared. The reasons for Cadbury being targeted by Kraft are mentioned in the essay and the potential synergies are also commented upon. Competition policy in the food industry of UK and US is identified then and its implications for the merger of Cadbury and Kraft are put down.
Individual Growth Prospects of Cadbury and Kraft
Cadbury has become one of the best and the biggest confectionery company in the world. Since 2002, the company has undertaken major steps to improve...
In the United States alone, M&A volume reached $1.75 trillion; Europe was trailing with $1.23 trillion after the takeover of Mannesmann by Vodaphone Airtouch with $181 billion. America Online took over Time Warner with $183 billion, and in Europe, there was the $76 billion merging of Glaxo Wellcome and SmithKline Beecham. Pfizer took over American Home Products, acquiring Warner-Lambert for $230 billion. (Grubb and Lamb, 2000, p. 9) “It seems that almost daily one hears of corporations – some willingly, some not – involved in such transformations as part of a strategy designed to achieve corporate growth, economies of scale, vertical integration, diversification, and even provision of capital for future le...
... the provisions of IFRS 3 in their decision – making process for future acquisitions.
In summary, IFRS 3 may be one of the more complex standards ever written and may also be one of the most important. Mergers and acquisitions (M&As), which are the topics of this standard, are of so importance to the entity, both due to their costs and their relevance to the business. Proper application of IFRS 3 and full disclosure of the transactions are thus needed for the investors and other users to have a grasp of the rationale behind such M&As and their impact to the company’s future and business. The FRC study has highlighted the basic problems with the provisions and the actual application of IFRS 3. The study has also pointed out...
... as well as combining of various organizations for mutual growth and benefit without requiring any creation of separate or another business related unit.
Merger and acquisition are two different business strategies. Acquisition mainly relates to buying process of a company termed as target by an acquiring company. Merger, on the other hand, relates to combining of two different companies into creation of completely different and a new company. Acquisitions are of different types like hostile, and friendly. From the business prospective, mergers are of different types like vertical, horizontal, and conglomerate mergers. The industry in which a firm belongs, and whether they are in similar industrial set up are considered by the merging...
...Cross Border Acquisitions and Synergies
Table of Contents
1. Subject area and reason for the choice of subject area 3
2. Purpose of a literature review 3
3. Method of searching for literature 4
4. Plan of the literature review 5
5. Literature review 6
5.1 Mergers and Acquisitions 6
5.2 Understanding Cross Border Acquisitions 13
5.3 Differences in country accounting and reporting standards 18
5.3.1 GAAP and IFRS 20
5.3.2 Fair Value 25
6. Analysis of academic research 27
7. Research plan 33
TABLES – FIGURES
Table 1 – Problems and Issues in the Acquisition Process 14
Table 2 – Selected Country Modifications to IFRS 24
Table 3 – Analysis of Factors 29
Figure 2 – UK Cross Border Acquisitions 17
The subject of culture and integration in merger and acquisition companies is usually thought of as a secondary task in the process. In fact, its importance and significance are just as significant as the analysis and synergies that are a part of the profit and market growth considerations that put the prospective company on the M&A radar (Gaughan, 1999, P.). The size of multinational corporations (MNC) was brought forth in a report titled ‘Growth in Multinational Corporations and the Impact on Culture’ that examined a number of theories on MNCs that included their impact globally as a result of there growth, along with different facets as represented by culture. In general, when one thinks of merger and acquisi...
30 Pages(7500 words)Research Paper
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