This is the document I used to prepare myself for the SMM233 Mergers & Acquisitions exam, for which I achieved a 73.
The document covers all important topics: the basics of deals, acquisition premiums, hostile vs. friendly, types of deals, the process, reasons, due diligence, anti-takeover defenc...
Table of Contents
Lectures..............................................................................................................................2
Week 1.........................................................................................................................................2
Week 2.........................................................................................................................................3
Week 3.........................................................................................................................................7
Week 4.........................................................................................................................................9
Week 5.......................................................................................................................................12
Week 6.......................................................................................................................................16
Cases................................................................................................................................18
The Cadbury Defence..................................................................................................................18
Battle for M&S............................................................................................................................21
Manchester United Buccaneers..................................................................................................24
Deutsche Börse...........................................................................................................................26
, Lectures
Week 1
Acquisition: Buyer + Target B’ (like buying a house)
- The buyer buys the target and the target has disappeared from the market. Maybe
the buyer has even taken the name of the target or a product; f.e. Apple bought
Beats and liked their headphones and incorporated their product into their product
mix.
Merger: X + Y = Z (like a marriage; 2 parties coming together as equals)
- X disappears; Y disappears a totally new company is created. You might still take
the name of X and that becomes the name of company Z or you can even take XY as
a name, f.e. Glaxo + SmithKline became GlaxoSmithKline.
Acquisition premium: usually between 20/40%; buyer has to pay 20 to 40% on top of the
undisturbed (before any acquisition rumours) share price to buy the shares of the company.
Kraft, however, bought Cadbury for 60% premium (because it was a hostile deal).
however, for a merger this is usually around 0%: who would pay that premium? Who
buys who? Yes, there is something called an exchange ratio, but it’s 2 parties coming
together (like a marriage).
Hostile vs. friendly
- Hostile: board of directors reject bid
o Only relates to publicly listed companies
o Hostile can become friendly to get the board to recommend it; Kraft raised
the price offer so high that eventually the BOD said yes because it’s at a value
that we don’t think we can actually bring to the company
o With a private company, you can’t go around the BOD to convince the
shareholders, thus only for public companies
- Friendly: 95%: where BOD recommends the bid to its shareholders
- Per year: around 3% is hostile bid, but only 0.3% stays a hostile bid so more than
99% is a friendly acquisition
Horizontal/vertical/conglomerate:
- Horizontal: 70 – 75%: you buy a competitor, someone who operates in the same
business (doesn’t have to be a direct competitor); f.e. if M&S buys Harrods
- Vertical: 25%: where you buy a supplier or a customer; where you go up of down in
the value chain
- Conglomerate: <-5%: you do a deal with a company that is unrelated to what you
currently do; f.e. an airline buying an icecream company (Unilever)
Types of M&A deals:
- Complementary: bidder acquires target to complement some weakness. F.e. Kraft
wanted to acquire Cadbury to strengthen its position in India and other emerging
markets (or LSE: had some weaknesses DB wanted to strengthen)
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller CityLondonStudent. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £5.99. You're not tied to anything after your purchase.
