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Report on Merger and Takeover Adison Business Sales Limited

   

Added on  2020-05-04

8 Pages2649 Words63 Views
Merger and TakeoverAdison Business Sales Limited (Intermediary) Student Name Student Id Course Name University Submitted To Due date

Concept and Implications of market efficiencyMerger and takeover can be defined as the term in which one company buys the other company for some valid consideration. For the merger or takeover process, there is need of at least three parties to be present here- the seller company, the buyer company and the intermediary. The buyer company is one which wants to buy the other company at minimum possible price. The seller may want to sell at maximum price. The third party, called intermediary, wants to take the maximum commission from both the seller and buyer. Role of my companyIn this game, I am playing the role of an intermediary. The benefit of being an intermediary is that there will be no loss on selling or buying process of the companies. The work of an intermediary is just to attract both the buyer and seller for the business. The commission receivedwill be a fixed percentage on the selling price. The name of company I formed for the selling andbuying companies is Adisons business sales limited. The role I m playing through intermediary is of broker business. There are various types of takeover that can be divided into three parts, horizontal takeover, conglomerate takeover and vertical takeover. The company we are selling is the type of horizontal takeover. In the horizontal takeover, the two companies operate in the same industry and at similar stage of production. The benefit for the merger of two companies is that it becomes beneficial for the shareholders to take better returns on their investments. The justification for the takeover or merger is that shareholders wealth will increase. The benefit for the horizontal acquisition is that it increases the market share. It helps to increase the monopoly profits of the company. The financial benefits for the justifications are that it becomes financially benefited for the investors. If the company is tax exhausted, then it becomes beneficial for that company to accept the merger option. Merger affects the capital market in the way that it becomes a decision point for the shareholders to invest in new merger company or take their values back and invest in another company. The main aim for companies going for merger and acquisition is to make a growth of the companies by investing in a single company. The shareholders of both the companies can enjoy the benefit of merger by taking the better return on investment. It is important to calculate the correct value of merger for calculating the correct profit.

Merger requires taking all the assets and liabilities of the company. The liabilities of the mergingcompany are also the liabilities of the other company. The value at which the company is merging is the market value of the business (Jim Milliot, 2014). The merger and acquisition happens in real life in a little complicated process. Financial intermediation also helps the buyers by financial help. They charge their financing charges by providing the funds to the buyers. The companies also go for the merger process when a similar company is not going so good but its existence affected the company’s growth. In this situation, the companies may deal with each other and merge the companies to gain the profit in the industry (Andrew J, Sherman, 2011). Thecompany going through the minimum profit will be taken by the company achieving the high profit. In the process of merging, there are various things that companies have to identify. There is needto identify the target company, identify the information about the targeted companies is also important. By using this information, the companies are able to understand the maximum purchase price in the market. It is difficult for the organizations to find so much information. Intermediaries help to find this information for the buying company. The buying or selling company does not need to go themselves to find out the company that will be beneficial for them(Stanley Foster Read, 2007). The intermediaries can find the information on the behalf of the companies. They decide the best way on which the companies can accept the target company. The intermediaries launch the bidding process for the company. The bid will be continued till theselling company gets satisfied.Role of Financial IntermediationFinancial institutions also play role in the merger and acquisition process. My company is also a financial intermediary. We help the sellers and buyer in many aspects like advising on bid value and organizing the defence tactics. We charge the advertising fee for the selling and buying fromthe companies. There are too many valuation methods which we can use to merge the company. These methods include stock valuation method, asset based valuation method and income based valuation method (Jeffery A Krug, 2008). These methods can further be divided into more types. Stock market value method is defined as the number of issued shares to be divided by their market price. It reflects the minimum purchase price of a company. It is the useful method for the buying company. Business Valuation

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