Mergers and Acquisitions: Strategies, Types, and Valuation

This report provides an overview of mergers and acquisitions, including the strategies, types, and valuation methods involved. It also discusses a hypothetical merger and acquisition between AT&T and BellSouth. The report aims to educate students about the critical aspects of mergers and acquisitions.

MERGERS AND
ACQUISITIONS

EXECUTIVE SUMMARY
The report consist of the mergers and the acquisition which include the strategy, type and
the valuation as well. It includes the offensive and the defensive strategies as well. It also has the
bid which is included in the process of the mergers and the acquisition. The hypothetical merger
and the acquisition is discussed in the report as well.

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................4
Mergers and acquisitions.............................................................................................................4
TASK 2............................................................................................................................................7
Hypothetical mergers and acquisitions between the two listed companies ...............................7
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................10

INTRODUCTION
Mergers and the acquisitions is the process in which the company would acquire the
business and the shareholding of the other company. The merger and the acquisition include the
strategies and the types by which the companies acquire the other companies. The report consist
of the mergers and the acquisition. Mergers and the acquisition consist of the offensive and the
defensive strategies and also valuation techniques and methods are described in the report. The
report consist of the hypothetical merger and the acquisition between the two listed companies as
well. The mergers and the acquisition would include the bid and the process which must be
followed by the company in the mergers and the acquisition process. Aim of these report is to
provide the knowledge to the students about the critical aspects of the mergers and the
acquisition. Two companies focused on in this assignment is AT&T and BellSouth.
TASK 1
Mergers and acquisitions
Mergers and acquisitions is the term used by the companies for consolidation or it can be
said that the companies merge with the other companies including the assets and liabilities,
assets and transactions as well. The companies take over the business of the other company. The
stock of the other company which is merging with the other company looses his identity and
stock of the other company is traded in the market. Acquisition is the acquiring the stake of the
company where the name of the company and the legal structure of the company is not changed
effectively. There are various types of the mergers and the acquisitions.
Consolidation is the process in which the new company is created and the both the
companies are approving the consolidation process. These companies have common equity
shares and also common assets and liabilities as well. The companies prepare financial
statements as the consolidated balance sheets (Feito-Ruiz, Fernández, and Menéndez-Requej
2015).
Tender offer company is giving the offers to purchase the stock the company at the price.
The buyer company is communicating with the share holders of the company and the other board
members of the company as well. In some cases the company does not lose identity while in
some cases the company loses it identity and merge with the other company.
In the process of acquisition of the assets the company is acquiring the assets of the other
company. The company which is selling the assets need to take the approval of the share holders

of the company and the company need to purchase the assets of the other company during the
time of the bankruptcy procedure. Various bankrupt companies sell their assets at the time of the
liquidation.
Management acquisition involves the company executives which are controlling the stake
of the another company. These executives are doing the partnership with the financier or the
corporate officers as well.
Identify the rational strategy, type and valuation of mergers and acquisitions
Mergers and acquisition strategies are varying form company to company. Companies
adopt the offensive and defensive types of the strategies which would be used effectively by the
company.
The companies use the offensive strategies in which the company is adopting the tender
offer and proxy fight. In the tender offer the buyer company offer to purchase the shares of the
company at the specific price and the strategy is quite costly and time-consuming of the share
holders. In proxy fight the company is giving the proxy vote in favor of the merger and the
acquisitions as well. The companies also adopt the defensive strategies which includes the
differential voting rights. Differential voting rights includes that each share holders have voting
rights and so the share holders must hold the majority of the shares and give the majority of the
votes in the favour of the mergers.
Types of the mergers and the acquisitions
mergers and the acquisitions are completed in four ways which include the horizontal,
vertical, conglomerate and concentric mergers.
Types of the mergers and the acquisitions
Horizontal mergers includes the two companies which are coming together with the
similar products and the services. Due to these companies would expand their range of the

products and the services. Vertical mergers include the two companies which are joining the
forces of the same industry but at the different points. These companies are vertically integrated
and the also improve the consolidating staff for reducing the time of the market of the products.
Conglomerate mergers are the mergers between the two companies which join the forces or
take over the range of the services and the products as well. Concentric mergers are the mergers
in which the companies are sharing the customers but providing the different services. The
mergers and the acquisitions types are depends upon the companies in which type they want to
merge the companies.
Valuation of the mergers and the acquisitions
mergers and the acquisitions' valuation is depends upon the companies and the valuation
methods involves price earning ratio method and enterprise value sales ratio (Pandit and
Srivastava 2016).
 Price earning ratio method: The ratio is the comparison of the company share price in the
current situation to per share earning. The ratio includes the market value of the share and the
earning on per share. Earning per share is calculated by the last four quarters performance of
the company. The higher price earning ratio would raise the expectations of the share holders
for earning high profits in the future as well (Wang and Moini 2016).
 Enterprise value to sales ratio: Company enterprise value is calculated by the value of the
sales of the company. The investors get the best estimate for the price and the other co any
would buy the company sales and also lower the estimate value would lower the sales ration
and companies are attracted to buy the undervalued company.
Identify the defence strategy and adopted in mergers and acquisitions
defensive strategies are used by the companies in different ways which include the
differential voting rights and the employee stack owner ship programs, poison pill and pac man
defence as well.
 Poison pill: In poison pill strategy the company is take over the company at the expensive
price which aims to deter the buyers as well. It is the share holders plan to take over the
shares of the company at the discounted price and then it is difficult for the buyer to control
the shares. In poison pill the company would discourage the buyers and the takeovers or also
grant the company about more favorable terms for the mergers and the acquisitions as well
(Nelson, 2018).

 Pac man defence: In pac man defense the company would choose the company in which the
company want to merge and then the company would buy the stock of the buyer company. In
turn the company does the take over of the own. The pac man defense, company need to have
the resources and it would be quite costly for the organization and its share holders as well
(Green 2016).
 Differential voting rights: every share holder in the company have its shares and according to
that the share holders would have voting rights in the company meetings. In this strategy the
shareholders would buy the majority of the shares and then the that share holder would cast
the vote in the favor and its would be quite easy to take over the company. Through this
strategy the different share holders of the company are upset and also it would give the
executive employees and it would have influence on the voting results as well (Johnson
2016).
 Employees stock ownership program: through applying these strategies the company would
make the tax plan which would grant the employees the interest in company. Through these
the employee would vote the management and not to the buyer which is ready to take over
the company. It would increase the loyalty and the satisfaction and the shareholders could
beat the company in the proxy fight.
 Golden parachute: it is an event in which the merger and the acquisition take place, it is
contracting the substantial benefits and the executives which would target the company to let
go the result and the deal as well. In this strategy the company would use the hostile bidders
and also provide the security to the management. Companies would provide the approach
which include the strategies as well. It would harm the reputation of the company and the
goodwill as well (Sposito, 2017).
 Crown jewel: in this strategy the company is selling the most profitable assets of the
company. So, the unwanted buyers would not be attracted towards the company. Through
this strategy the company would destroy its own value and the company would also loose the
most valuable assets of the company as well. Many companies are approaching to the
friendly third company which would buy the assets. After the buyer drops the plan to bid and
after that the company would buy the assets back form the third party. Through this strategy
the company is not attractive to the mergers and the acquisitions (Pelov and Nguyen, 2018).

By following these strategies and the valuation measures the company is consolidating
with the other companies and these types of the companies need to prepare the consolidated
financial statements which include the financial statements and the financial position of the
company as well. The company need to follow the procedures of the mergers and the acquisition
which is including the process of the government for the merger and the acquisitions. Then
merger and the acquisitions of the company cannot be done without the consent of the one
member of the company. In the meeting all the members of the company must approve the
mergers and the acquisitions.
One of the most commonly known merger and acquisition that happened till now is AT&T
and Bell Souths. AT&T used aggressive strategy for this acquisition.
TASK 2
Hypothetical mergers and acquisitions between the two listed companies
Hypothetical merger and acquisition include the two listed companies. The companies in
which the merger is taking place is AT&T company and BELL SOUTHS company. The
companies are dealing in the same products and the services. These both the companies have to
follow the mergers and the acquisition process. The process would include the strategies and the
types and the valuation of the mergers as well.
Mergers and acquisitions process and steps
 Determine the growth of the market and the services: in the process of the merger and the
acquisition the company would start the procedure by the determining the growth of the
company in the market. In order to determine the growth the company would analyze the
data form the clients customers and the employees and competitors as well. The business
strategies and the programs are tested and evaluated as well. For example the AT&T

company is planning to merge with the BELL SOUTHS company so the AT&T company is
evaluating the growth and the reputation of the company in the market. The employees of the
company would give the proper view of the company (CARTWRIGHT and Cooper,, 2016).
 Identify the merger and the acquisition candidates: In the second step the company would
identify the merger and the acquisition candidates as well. The financial objectives of the
company would meet the strategic and the growth objectives as well. It involves the methods
and the management experiences, research as well. For example the Bell Souths company
want to achieve the growth in the market and the company want to merge with other
company so the company would search for the other company which want to merge with the
company.
 Assess the strategic and the financial position of the company: The company must look after
the financial position of the company and also must think about the company would merge
and fit with the financial position of the company. The financial position is calculated and
evaluated by the financial statements and the credit position of the company in the market.
The entities, revenue and the balance sheet would give the exact financial position of the
company. For example the company AT&T want to acquire the company BELL SOUTHS
than the company AT&T would evaluate the financial position of the company and also look
after the volume and the revenue and the financial statements as well.
 Decide what to do: After evaluating all the factors which are necessary for the mergers and
the acquisition. At the time of the decision the leaders which are taking the decision would
evaluate the decision and also look after the impacts of the decision on the company and the
goodwill of the company.
As example provided in the above step the company AT&T is evaluating the decision in the
meeting and looking after what to do and what not must be done. The leaders of the company
had look after the decisions of the company and the impact of the decision on the company
(Brooks, Chen, and Zeng, 2018).
 Conduct the valuation: The step would include the merger and the acquisition process which
includes the target company and the valuation of the company is to be done effectively. The
valuation includes the three methods. Discounted Cash flow analysis, publicly traded
company analysis and the comparable transaction analysis. Through this valuation the
company is able to figure out the financial status of the company and the price company

could be take over. The AT&T company is adopting the discounted cash flow analysis for the
company. In the discounted cash flow analysis the company would generate and grow the
cash flow for the share holders of the company. Cash flow is the cash generated from the
business and the free cash flow projection period as well. The method would evaluate the
valuable tools and the and also value the enterprises as well. It is totally bases on the cash
flow and the not affected by the accounting practices as well. So the company would use the
discounted cash flow method for valuation of the BELL SOUTHS company (Reddy and Xie
2017).
 Perform the due diligence and execute the transaction accordingly: In these step the company
is acquiring the company and the organization which is acquiring the company need to be
complete all the procedures and also complete all the paper work for the completing the work
accordingly and also review the targets and the financial status of the company. Due
diligence involves the financial and the legal matters which must be looked by the company
before the acquiring. The transaction must be done in the accurate way, but before doing the
transaction there it comes the method in which the organization would acquire the company
and the strategies used for the company to look after the merger and the acquisitions. The
methods of the mergers are the horizontal mergers, vertical mergers and the conglomerate
merger and the co generic mergers as well. AT&T company and the BELL SOUTHS
company is dealing in the same products and the same industry as well. So the company
would use the horizontal mergers in that the company would share the same products and the
market as well. In the horizontal merger company would use the same products and merge by
the mutual consent as well. In these the companies would expand their product and the
market as well. These companies would also come up these new products which are
innovated by using both the company technology as well (Angwin, Mellahi, Gomes and
Peter 2016).
 Implement on the process and also monitor the performance of the company:A successful
mergers and the acquisitions need to be maximized the strategies and the also avoid the
distraction and the disruptions as well. The hr management and the employees of the
company must be satisfied with the mergers and the company must also have followed the
legal procedures form the merger and the acquisitions. The impact of the merger and the
acquisition would be seen after the quarter profits of the company whether the company had

managed the services and also the company is able to manage the customers and provide the
customers what they need. Mergers and acquisition success can also evaluated by the market
behavior towards the company. The AT&T company is evaluating the merger success by the
performance of the company in the market and whether the employees are accepting the
mergers or not. Whether the customers have welcomed the merger and the acquisitions too
not. The share market must welcome the mergers and the acquisition, prices of the shares are
showing the market behavior towards the company. The company can also change the
strategies through which the company would also manage the services and the products as
well (Barbopoulos and Wilson, 2016).
In these process of the hypothetical merger company is using the strategies and the
methods of the merger and the acquisitions for acquiring the BELL SOUTHS company. The
AT&T company would effectively run the business and the company had followed all the
procedures and the legal procedures for the mergers and the acquisitions as well. The process of
the hypothetical procedure the company need to work accordingly and the company need to
acquire the other company assets and the liabilities as well.
CONCLUSION
The report is including the mergers and the acquisition which also include the strategies
and the types of the mergers. Mergers and the acquisition are the term which are used for
consolidating the companies. Consolidation of the companies is done by the merging the assets
and the management of the company. Liabilities of the company is also managed effectively and
the company would also see the financial position of the company as well. The merger can be
done in the way of the consolidation and the tender offer and the acquisition of the assets as well.
Mergers can be done by the acquiring the management of the company. The types of the mergers
involves the horizontal merger and the vertical merger. Congeneric merger and conglomeration
merger are also the types of the mergers as well. Valuation of the companies is important at time
of the merger and the acquisition as well. Valuation of the companies is done in the effective
ways like the comparative ratios and the price earning ratio and also the replacement cost method
as well. Through this method the company would valuate the company financial condition as
well.

REFERENCES
Books and journals
Angwin, D.N., Mellahi, K., Gomes, E. and Peter, E., 2016. How communication approaches
impact mergers and acquisitions outcomes. The International Journal of Human
Resource Management. 27(20). pp.2370-2397.
Barbopoulos, L. and Wilson, J., 2016. The valuation effects of earnouts in mergers and
acquisitions of US financial institutions.
Brooks, C., Chen, Z. and Zeng, Y., 2018. Institutional cross-ownership and corporate strategy:
The case of mergers and acquisitions. Journal of Corporate Finance. 48. pp.187-216.
CARTWRIGHT, S.C. and Cooper, C.L., 2016. Managing mergers acquisitions and strategic
alliances. Routledge.
Feito-Ruiz, I., Fernández, A.I. and Menéndez-Requejo, S., 2015. Mergers and acquisitions
valuation: the choice of cash as payment method. Spanish Journal of Finance and
Accounting/Revista Española de Financiación y Contabilidad.44(3). pp.326-351.
Green, M.B., 2016. Mergers and acquisitions. International Encyclopedia of Geography: People,
the Earth, Environment and Technology. pp.1-9.
Johnson, G., 2016. Exploring strategy: text and cases. Pearson Education.
Nelson, T., 2018. Mergers and Acquisitions from A to Z. Amacom.
Pandit, S. and Srivastava, R.K., 2016. Valuation in merger process. Journal of Teaching and
Education. 5(01). pp.361-370.
Pelov, S. and Nguyen, H.H., 2018. Distressed Mergers and Acquisitions.
Reddy, K.S. and Xie, E., 2017. Cross-border mergers and acquisitions by oil and gas
multinational enterprises: Geography-based view of energy strategy. Renewable and
Sustainable Energy Reviews. 72. pp.961-980.
Sposito, M., 2017. Strategic Mergers and Acquisitions in China: an Overlook at Brembo SpA
acquisitions in Chinese Market (Bachelor's thesis, Università Ca'Foscari Venezia).
Wang, D. and Moini, H., 2016. Motivations, Valuation, and Performance Assessment in Cross-
border Mergers and Acquisitions: Theory and Field Evidence. In Perspectives on
International Business. Adonis & Abbey Publishers.