MSc Professional Accounting Report: M&A Advisory and Factors

This report, prepared for an MSc in Professional Accounting, delves into the realm of mergers and acquisitions (M&A). It begins with an introduction that highlights the increasing significance of M&A in the corporate world, citing statistics on global deal volumes and the growing role of M&A advisory firms. The report provides an overview of M&A, defining mergers and acquisitions, and distinguishing between different types such as horizontal, vertical, and conglomerate mergers, as well as friendly and hostile takeovers. It then examines the factors influencing the choice of M&A advisory firms, emphasizing the benefits of intermediaries, such as efficiency gains in information gathering and partner searching. The report also explores critical success factors for target companies and project success criteria, defining these terms and highlighting their importance in determining project outcomes. Furthermore, it discusses the critical factors that lead to spotting winning mergers and concludes by summarizing the key findings and providing references for further study. The report aims to provide a comprehensive understanding of M&A activities, the roles of advisory firms, and the critical elements that contribute to successful outcomes.

Running head: MSC PROFESSIONAL ACCOUNTING
MSc Professional Accounting
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Section 1..............................................................................................................................2
Introduction..........................................................................................................................2
Mergers and Acquisition Overview.....................................................................................3
Factors affecting merger and acquisition advisory choice..................................................6
Critical Success Factors for the target company..................................................................8
Project Success Criteria.......................................................................................................9
Critical success factors......................................................................................................12
Critical success factors for projects...................................................................................12
Spotting Winning Mergers’ Critical Characteristics.........................................................13
Conclusion.........................................................................................................................14
References for Section 1....................................................................................................16
Section 2............................................................................................................................19
Reflective Essay.................................................................................................................19
References for Section 2....................................................................................................23

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Section 1
Introduction
As discussed by El-Khatib, Fogel and Jandik (2015), the corporate mergers and
acquisitions have received a lot of publicity in the academic as well as corporate world. In 2005,
Thompson Financial reports were seen to announce a worldwide deal volume of US $ 2.7 trillion
which is an increase of more than 38% from $ 2 trillion in 2004. In compared to this, the value of
the deal increased by 33.3% to USD 1.1 trillion an announced in 2005. Additionally, the Europe
deal volume also went up by 37% to US $ 1.2 trillion and additionally the Asian deal volume
also experienced a surge of 64% to USD to 280 million. Several corporations around the world
considered M&A strategies for realizing the cost synergies as for the increased competition,
product mix, pricing pressures and concentration of the asset.
In the recent times, as the number of M&A transactions keeps on increasing, the advisory
entities of M&A as those opposed to the global investment banking have been benefited from
this trend. The global investment banking and brokerage industry is depicted to generate total
revenue of USD 57.5 billion in 2005 in which USD 19 billion was as a result of M&A activities.
Additionally, it is also not common for the company’s especially small and medium companies
with insufficient expertise to manage thine house M&A activities. It is more common for the
large corporations for establishing the in-house financial and corporate deployment departments
for employing the advisory services and utilizing the valuable content network and efficient use
of client personal close to monitor the transactions (Products 2015).
The main purpose of the study inside discussing the fact that shareholders in “target
company gain more in the short-term and medium-term compared to the shareholders in the

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acquiring company”. This discussion is further supported with various types of assessments
which are associated to the process of conducting is business combination activities.
Additionally, the project’s success criteria are also measured from the merger and acquisition of
advisory firms (Belleflamme, Lambert and Schwienbacher 2014).
Mergers and Acquisition Overview
The topic of merger and activity is gaining increasing importance in the last two decades
with response to more and more merger and activities being increasingly complex in terms of
transactions involved. In a broad sense, M&A activity implies the total number of different
transactions which ranges from a number of purchase and sales activity is concentrated between
the joint ventures, alliances and undertakings for ensuring independence of business. There are
several explanations to this theory which leads to confusion and misunderstanding due to the
strategic alliances. Merger is identified as a combination between two entities for creating a
separate entity. Acquisition is the act of purchasing assets or shares of another company for
achieving managerial influence which may not be or maybe in the mutual agreement (Kansal and
Chandani 2014). The model of M&A has been depicted below as follows

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Figure: Model of Merger and Acquisition
(Source: Yang, Wei and Chiang, 2014)
In general, mergers are commonly denoted as merger by absorption or merger by
establishment. In situation of absorption, the company buys all the stocks from a single or
multiple companies and in case of apps of companies the establishment of merger refers to
merging of two new entities into a single new entity. The merger by absorption can be viewed as
de facto acquisition beside the term consolidation can be also implied for merger by
establishment (Mas-Verdú, Ribeiro-Soriano and Roig-Tierno 2015).

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During the acquisition of companies, the buying company may pursue a significant share
of the stocks of a target company. Similarly, there are important forms of acquisition, namely
share acquisition and asset acquisitions. In a share acquisition, the company is depicted to
purchase certain percentage of stocks of the target company for influencing the management.
Whereas, during asset acquisition the company buys all parts of the target company’s assets and
the target sustains as a legal entity. Based on the significance of shares of stocks, the company
acquisitions are further categorized into three types. This includes: “complete take over (100%
of target’s issued shares)”, “majority (50-99%)”, and “minority (less than 50%)” (Yilmaz and
Tanyeri 2016). In addition to this, the merger and acquisition are depicted as to separate from the
actions which have several consequences based on the legal obligations, tax liabilities and
procedure of acquisition. Despite of this, in general the final outcome of M&A transactions
considered in which two or more companies are seen to combine their business affords and we
do not make an effort to separate this merger transaction from acquisition ones. In such a
situation, M&A is treated as a corporate finance service which provides M&A advice to the
firms (Ferris, Houston and Javakhadze 2016).
In context of classification of mergers and acquisitions, the main perspective of value
chain for M&A is categorized as horizontal, vertical or conglomerate. In case of horizontal
M&A, the target companies and the acquiring companies are depicted as competing in the same
industry. In addition to this, in horizontal business combination process the restructuring in
business occurs as a result of technological changes and liberalization. This particular trade is
evident in industries related to petroleum, the mobile and pharmaceuticals (Yılmaz and Tanyeri
2016). A similar example of this can be seen with the merger of two US giants namely Glaxo
and SmithKline Beecham with a total value of USD 76 billion. Based on the statement of the
former CEO of SmithKline Beecham the main aim of combination of two companies was
depicted with research and development synergies to drive the revenues and explore enormous

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opportunities for revenue creation. The vertical merger and acquisition are common with firms in
buyer and seller relationship and client supplier relationship. Many companies often seek to
reduce uncertainties of the transaction costs by considering the downstream and upstream
“linkages in the value chain” in order to benefit from economies of scope. Finally, several
companies that tend to diversify the risk and attain economies of scope by engaging in
conglomerate merger and acquisition transaction in which the business are operating as unrelated
entities. For instance, the vertical merger and acquisition is clear with the business combination
of General foods and Philip Morris in a deal of USD 5.6 billion (Porter and Heppelmann 2015).
The last category of merger and acquisition needs to be depicted with friendly and hostile
mergers. In situations when the target company agrees to the transaction then it is known as
friendly merger. On the other hand, if the board refuses an offer in several situations, the
acquiring company offers wishes against the target company. Finally, M&A transaction can also
take place either with cross-border or domestic transaction. In case of cross-border M&A
activity, the two forms located in different economies are depicted to operate in a single
economy but belong to two different countries.
Factors affecting merger and acquisition advisory choice
Comprehensive discussion on the various benefits in acquiring the target firm is often
seen with enjoying the result of employing M&A advisory firm. It needs to be further understood
that there are two prominent advantages of the advisory M & A firms. Firstly, the intermediaries
of M&A are able to deliver a certain level of anonymity to the target and acquiring forms which
is of significant importance due to the initial discussions prior to the start of merger and
acquisition negotiations. Secondly, the intermediaries may have certain specialized knowledge
on the particular characteristics of a form which includes the information on the upmarket
potential and financial potential with that wearers may not have. Additionally, the employment

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of M&A intermediaries has the scope of exploiting the various benefits as a result of
comparative advantages (Mnih et al. 2015). Some of the lesser-known facts of engaging in
business combination activities are any moderated as follows:
Efficiency Gains Based On Information Cost
In situations when the form is to not hire any intermediaries for merger and acquisition,
they are particularly seen to see for potential partners by themselves. The information gathering
process takes place with those partners will cause the cost of the firms. In case, there is any
potential of failing to materialize information, it is considered as a waste from society’s point of
view as the intermediaries would create an updated database for potential M&A partners and
utilize the same with various types of engagements. Due to this, the intermediaries of M&A are
often seen to provide the insurance for any scope of sampling error which may seek the firms to
adopt merger and acquisition activities without any advisory assistance. Therefore, the
intermediaries with merger and acquisition market have more efficiency than the ones which
does not have (Ouyang and Hilsenrath 2017).
Efficiency gains as per searching of potential partners
In various situations the forms incline to search for information about the potential
partners only when they are in need for M&A assistance. However, it is to be seen that the
advisory firms continue the searching process of M&A on a continuous basis thereby enabling
that writers for suggesting potential partners to their clients in several conditions thereby
reducing sampling errors.

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When it comes to M&A of the advisory firms, two important empirical studies have a
significant role to play. A sample of acquisition collected from over a period of 1981-1992
shows the assessment of three hypotheses namely “transaction costs, asymmetric information,
and contracting hypotheses”. These empirical researches have shown that the advisory firm of
M&A in the banking industry have depicted several implications on investment bank -assisted
transaction which is more often taken over by hostile means and less likely to be all-cash
financed. In addition to this, when they acquirer is not seen as the first bidder then it is more
likely that the investment bank will take its part. In terms of the contracting hypotheses there are
several studies which showed that investment banks have it reducing tendency of the agency
costs in terms of acquiring the firms which certifies the value of acquisition. Additionally, the
acquiring forms are also more likely to use the investment bank while purchasing of publicly
traded companies (Dimopoulos and Sacchetto 2017).
Critical Success Factors for the target company
As stated by Kruglova and Zubkov (2017), some of the main critical success factors for
the merger and acquisition activities needs to be taken into consideration with the description of
project success standards for M&A projects from different viewpoints and advisory firms. The
second aim of this section identifies the critical factors for merger and acquisition projects.
Before stating the review of the literature it is important to note that terminologies namely
critical success factors and project success criteria have control in determining the review the
party “who gains” and “who loses” in the short, medium and longer terms and whether the gains,
if they exist, are found in all cases (Piper and Schneider 2015).
Critical accomplishment factors are identified as “the set of circumstances, facts, or
influences which contribute to the project outcomes”. Secondly, the success criteria of a project
is set out with the standards of principles through which success in the project can be brought.

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The various types of critical factors can be also perceived as a result of impeding conditions
which effect the project result whereas the project success criteria are viewed as a result of
measurement agreed among the stakeholders for assessment of project outcomes. In addition to
this, there are several researchers who have observed the critical success factors in the recent
times to be categorized as dependent variables. In other words, the critical success factors can
significantly have a positive impact on the project outcomes which will be conducive for
assessment of measurement factors as specified in the project success criteria (Abbott et al.
2016). Moreover, the issues associated to project success criteria are stated as follows:
Project Success Criteria
in the past, several early researchers have identified the success criteria is such as “iron
triangle of time, budget and required quality”. However, in the recent corporate environment
these measures are unlikely to fetch the desired outcome. There have been several claims made
that if a project is measured with variables of the time, scope and cost, it suggests that project
management is only serving in a tactical way and not in a strategic way. Based on several types
of literature review it has been explained that the development of criteria leading the success of
the project is based on internal aspects since the external aspects are particularly complicated and
generally included in the handover phase (Bowers, Hall and Srinivasan 2017). Nevertheless, the
recent researchers have included several external aspects which are critical in including
stakeholder community benefits, organizational benefits and achievement of business goals. This
is viewed with in a modern merger acquisition transaction of “Qantas Holidays, Qantas
Business Travel” and the “Jetset Travelworld Retail Group”, merging with “Stella Travel
Services PTY. LTD” (Airline Business 2015).
Some of the other successful mergers and acquisition activities in the country has been
depicted with Hanesbrands Inc. acquisition of Pacific Brand Ltd. in a deal of $ 1.1 billion. “HBI

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Australian Acquisition Co. Pty Ltd” was identified a fully subsidiary under Hanesbrands Inc.
Some of the main form of proceeding of the deal can be identified with the offering of an all cash
bid of $ 1.15 per share for 100% of the company. The price was further depicted to be segregated
into a purchase of $ 1.056 and a $ 0.0094 fully franked special dividend per share. The total
transaction has been depicted to be equated with an overall price of $ 1.1 billion.
The Genesee & Wyoming acquisition of Glencore Plc is identified as another important
M&A activity which is worth $1.14 billion. The Glencore involved an asset for the sale program
to reduce the pile of the overall debt. The M&A activity was conducive for the reducing the $ 50
billion debt. The program further led to several types of the issues which are seen to be
associated to the right to transport 40 million of the coal to the Port of Newcastle in each year. In
their complex deal RBC capital ran the Glencore’s auction and Glencore was able to obtain the
legal advice by the “Bank of America Merrill Lynch, and Allens” who was responsible for their
legal work.
The M&A activity of Baring Private Equity and SAI Global Ltd took place in 2016 is
also considered to be significantly important. The $ 1billion was considered as an all cash offer
which was accepted in September for $ 4.75 per share and 34% of the premium was adjusted as
per the weight of the average price at the time of acquisition (The Typewriter 2016).
This merger can directly be viewed as a short-term and medium-term gains for Qantas
group as the main intention of entering into M&A activity was depicted with including
stakeholder community benefits, organizational benefits and fulfilment of business goals of
Qantas. Additionally, there are several other measurements to assess the outcomes of project
which includes different perspectives of viewing the project manager’s opinion and public
opinion in general. These explain why the same project is perceived as a success by a one group
and failure by other. For instance, one project might be identified as successful as per the client,

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on the other hand the same project may not be finished within timeframe and be considered
unsuccessful in the aspect of project management (Obokata et al. 2014).
With particular relevance to M&A projects, the advisory Council of the firms often take
control of the Central advisory role on client’s behalf. In several situations, the project team
forms its own member of personal with varying nature of expertise is and the stakeholders either
in the target form or acquiring form. In other situations, the key stakeholders are considered as its
clients either in the target form or acquiring firm. In situations, then there is requirement for
several advisers, the M&A advisory firm especially the investment banks take his role is as a
coordinator.
On the other hand, there are several understandings from other excerpts states that forms
engage in different types of M&A activities which can bring successful fulfilment of the firm’s
motives. In case, the merger and acquisition deal is initiated the manager toward their own
individual benefits are allowed to maximize the same. In majority of the cases, the motives can
be realized once the deal is closed. In general, M&A advisory firm are normally seen to be
engaged in several stages towards the closure. In these cases, a major concern is seen with the
significant influence. This points to the concurrence of one finding from an empirical study
stated that the benefit of choosing high-quality investment banker using a sample of 114 U.S.-
based deals of M&A obtained out of the 600 completed deals reported by Mergers &
Acquisitions. The study showed that the investment bank acted as an intermediary and did not
create wealth which underlies the main motives of M&A advisor choice. The main findings of
the study further revealed that the absolute and relative wealth were not related to each other and
there was a possibility of negative correlation with the reputation of the advisor and bidder. This
has raised several questions about the doubts concerned with merger and acquisition projects.