Tag Archives | merger

Mergers and Acquisitions (M&A)

See Also:
Make-or-Buy Business Decision
Company Life Cycle
Company Valuation
Return on Equity
Financial Ratios
Joint Venture (JV)
Accretion

Mergers and Acquisitions Basics

Mergers and acquisitions (M&A) refer to the buying, selling, and combining of companies. In an M&A deal, two companies become one.

M&A deals are typically facilitated by investment bankers. Before going through with a merger or an acquisition, both sides of the deal will conduct due diligence – a thorough analysis of all aspects and consequences relating to the proposed deal – to make sure it will be beneficial to their side of the deal. Mergers and acquisitions are a normal part of business happenings in a healthy economy.

Merger or Acquisition?

Although many combine these two terms, there is a difference between mergers and acquisitions. Mergers refer to the combination of two companies. Mergers are often mutually acceptable by both companies and the new entity often combines the names of the two original entities. In a merger, the two companies that merge combine and become a new company. Furthermore, this involves surrendering the stocks of the old companies and issuing stock for the new company.

Acquisitions refer to one company purchasing another company. This typically occurs when one of the companies is significantly larger than the other company – the acquirer is larger than the target. In an acquisition, the target company ceases to exist as a separate entity and becomes a part of the acquiring company. Acquisitions are not always mutually acceptable to both parties. For example, a company can buy another company even if the target company does not want to be bought. Sometimes mutually acceptable acquisitions are called mergers to make the deal sound friendlier.

Friendly Merger or Hostile Takeover?

Mergers are always friendly, or mutually acceptable to both companies. Acquisitions can be either hostile or friendly. A hostile acquisition, or hostile takeover bid, is one in which the acquirer buys a target that does not wish to be bought. A friendly acquisition is one in which the target company does want to bought.

M&A Synergy

The purpose of an M&A deal is to achieve synergy. Basically, synergy is the concept that the whole is greater than the sum of its parts, or one plus one equals three. The idea is that the two companies will be more valuable together than they were as separate entities.

You can achieve synergies in various ways. The combined companies may achieve cost efficiencies, greater market share, a stronger competitive position, and enhanced revenues. You may also achieve these benefits through economies of scale, staff reductions, or sharing of technology. While striving for synergies is a goal in M&A deals, the combined companies do not always achieve the sought after synergistic benefits.

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Mergers and Acquisitions

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Mergers and Acquisitions

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New York Stock Exchange (NYSE)

See Also:
National Stock Exchange of India (NSE)
Proprietary Trading
Coupon Rate Bond
Currency Exchange Rates

New York Stock Exchange (NYSE) Definition

Located in New York City, the New York Stock Exchange is the world’s largest exchange according to its market capitalization around $12.5 million. It is an exchange for financial items like stocks, bonds, currency, etc.

New York Stock Exchange (NYSE) Meaning

The NYSE exchange was founded in the year 1817 to ease the exchange for transactions. This stock exchange contains several different indexes like the Dow Jones Industrial Average and the NYSE composite. The NYSE composite is not as widely used, but the Dow Jones is considered one of the leading indicators of how well the market is doing as a whole. This is because the Dow Jones measures how well some of the largest companies in the world are performing. In order to stay current with the NASDAQ and grow internationally, the New York Stock Exchange (NYSE) acquired Archipelago in 2005, and then went into a merger with Euronext in early 2007. These two moves brought the NYSE up to date with electronic trading and it also established the NYSE as a world player.

New york stock exchange

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Golden Parachute

Golden Parachute

A golden parachute refers to a generous compensation package promised to a senior executive in the event that the executive leaves the company. It is a contractual agreement between the company and the employee. The contract stipulates the conditions under which the executive will receive it. Some of the conditions may include the following:

The compensation package may include the following

Advantages and Disadvantages

A golden parachute can make it easier for a company to attract and retain talented executives. A golden parachute can also discourage takeovers by increasing the cost of the takeover.

On the other hand, if they are dismissed due to poor performance, then companies still often provide excessive compensation for executives. Also, the cost of it may not discourage takeovers because it may be an insignificant cost compared to the overall cost of the takeover.


The golden parachute protects the company much like a CFO protects and guides the CEO. If you’re interested in becoming the trusted advisor your CEO needs, download your free How to be a Wingman guide here.

golden parachute

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golden parachute

See Also:
How to Compensate Sales Staff
How to Keep Your Corporate Veil Closed
Corporate Veil
Employee Stock Ownership Plan (ESOP)
Intrinsic Value- Stock Options
How to Hire New Employees

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Euronext Definition

See Also:
New York Stock Exchange (NYSE)
London Stock Exchange (LSE)
Frankfurt Stock Exchange (FSE)
Shanghai Stock Exchange (SSE)

Euronext Definition

What is the Euronext definition? The Euronext exchange was formed in the year 2000 through a merger between the Amsterdam, Paris, and Brussels exchanges. In addition, it is one of the larger exchanges in Europe in terms of trading volume and market capitalization.

Euronext Meaning

The Euronext market is traded using an electronic system called the New Quotation System. The great thing about this electronic system is that it allows an investor to invest without even contacting his/her broker. Simply submit the order via the internet. If the system does not execute the order immediately, then submit it into the limit order book. Euronext currently has agreements with several other European markets, and they have become known as cross-trade agreements. In 2007, Euronext merged with the NYSE group. As a result, many around the world know it as the NYSE-Euronext. It is the first global stock exchange. The most commonly used Euronext index is the CAC 40. In addition, the CAC 40 is the 40 most significant companies in a capitalization weighted index of the 100 largest companies within the Euronext.

euronext definition

 

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