Learning Objectives
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# Learning Objectives - Understand M&A motives and types - Evaluate acquisition target valuation - Analyze deal structures and financing ## 1. Types of M&A **Horizontal:** Same industry (competitors) **Vertical:** Supply chain (supplier/customer) **Conglomerate:** Unrelated businesses ## 2.
Learning Objectives
- Understand M&A motives and types
- Evaluate acquisition target valuation
- Analyze deal structures and financing
1. Types of M&A
Horizontal: Same industry (competitors) Vertical: Supply chain (supplier/customer) Conglomerate: Unrelated businesses
2. Motives for M&A
- Synergy (operational, financial, managerial)
- Diversification
- Market power
- Tax benefits
- Managerial entrenchment (agency problem)
3. Valuation in M&A
Synergy: Value of combined firm > sum of individual values. Premium = Offer price - Pre-announcement price.
4. Financing M&A
Cash vs. stock deals. Tax implications.
Q1: What is synergy in M&A?Synergy = Value(A+B) - (Value(A) + Value(B)). Could come from cost savings, revenue enhancements, or tax benefits. Q2: Why do many M&A deals fail to create value?Overpayment, integration difficulties, cultural clashes, principal-agent problems (managers pursue deals for personal reasons). Q3: Compare horizontal and vertical integration.Horizontal: merger with competitor (economies of scale, market power). Vertical: merger with supplier/customer (control over supply chain). Q4: Target valued at 20M. Offer price=$115M. What is NPV to acquirer?NPV = (100+20) - 115 = $5M. Positive, so value-creating. Join Discord PreviousOptions & Real OptionsNextInternational Corporate Finance