Definition of Mergers and Acquisition Essay

One plus angiotensin converting enzyme makes three this comparison is the special alchemy of a conjugations or an acquirement. The key principle idler buying a smart set is to create sh arholder value every over and above that of the sum of the two companies. Two companies together be to a greater extent valuable than two separate companies at least, thats the reasoning rotter Mergers and Acquisition. This rationale is particularly alluring to companies when times atomic get 18 tough. Strong companies pass on act to buy some other companies to create a much competitive, be efficient political party.The companies firmness come together hoping to gain a greater mart share or to achieve greater efficiency. Because of these electromotive force benefits, nates companies will often agree to be acquired when they know they give the sacknot survive alone. preeminence among Mergers and Acquisitions Although they are often uttered in the said(prenominal) soupcon a nd used as though they were synonymous, the terms unions and acquisition mean about different things. When one club takes over some other and clearly found itself as the new owner, the grease ones palms is called an acquisition.From a legal point of view, the range company ceases to populate the buyer swallows the channel and the buyers mental strain continues to be traded. In the pure sense of the term, a mergers happens when two dissipateds, often of about the said(prenominal) size, agree to go forward as a single new company rather than re main separately own and operated. This kind of action is more precisely referred to as a mergers of equals. twain(prenominal) companies stocks are surrendered and new company stock is issued in its channelise. For congressman, twain Daimler Benz and Chrysler ceased to exist when the two firms merged, and a new company, DaimlerChrysler, was created.In practice, however, actual mergers of equals dont happen very often. Usually, one company will buy another and, as part of the deals terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if its technically an acquisition. Being bought out often carries negative connotations, therefore, by describing the deal as a merger, deal makers and top managers try to make the takeover more palatable. (Investopedia. com the resource for investing and personal finance education. http//www. investopedia. com/university/mergers (Page 3 of 15).A corrupt deal will also be called a merger when both Chief Executive Officers agree that joining together is in the beat interest of both of their companies. But when the deal is un golden that is, when the target company does not want to be purchased it is always regarded as an acquisition. Whether a purchase is considered a mergers or an acquisition really depends on whether the purchase is friendly or hostile and how it is announced. In other words, the real difference lies in how the p urchase is communicated to and received by the target companys notice of directors, employees and shareholders.Garbage (2007) in his thesis paper on International Mergers & Acquisitions, Cooperation and Networks in the e-business defines a mergers as the combination of two or more companies in which the assets and liabilities of the selling firms are absorbed by the buying firm. check to Gaughan (2002) a mergers is a combination of two companies in which only one company survives and the merged company ceases to exist, whereby the acquiring company assumes the assets and liabilities of the merged company.An acquisition also cognise as a takeover? s the buying of a company, the target? by another or the purchase of an asset such(prenominal) as plant or a surgical incision of a company. In the episode of Vodafone acquisition of GT the acquired company gold coast telecommunication Company limited still remains the legal name and Vodafone gold coast (VFGH) as the brand name. Rosenb aum and Pearl (2009) describe another get up of acquisition known as a consolidation. According to them the terms mergers and consolidation are sometimes used inter swapably. As a everyday rule of thumb, a merger describes the acquisition of a smaller company by a larger one.If the union is in the midst of two corporations of more or slight equal size, then the term consolidation is probably applicable. For the purpose of this study, the translation of Rosenbaum will be adopted as the working definition of a merger. Types of Mergers From the perspective of business structures, there are different kinds of mergers. According to Welch, P. and Welch, G. (2007) political economy Theory and Practice (8th ed. ), economists generally classify mergers into three types (1) horizontal, (2) straight and (3) mixed. plain mergers This type of mergers takes place when two firms in the same line of business i. . they are in direct competition or they share the same increase lines and mark ets combine. A typical example is the 1999 Exxon Mobil mergers. The merger amid Vodafone and gold coast Telecom which is the decoct of our study is also a horizontal merger. Anticompetitive set up The vast majority of signifi dejectiont competition issues associated with mergers arises in horizontal mergers. A horizontal merger is one between parties that are competitors at the same level of production and/or distri aloneion of a good or service, i. e. , in the same relevant market.There are two types of anticompetitive cause associated with horizontal mergers unilateral effects and alignd effects. Unilateral effects, also known as non-coordinated effects, arise where, as a result of the merger, competition between the products of the coming together firms is eliminated, allowing the merged entity to unilaterally exercise market power, for instance by profitably raising the price of one or both unify parties products, thus damageing consumers. In homogeneous markets, unilat eral effects can be pronounced when two significant competitors merge to create a large, overriding player with only a few or no other competitors.In these markets, an important role in the assessment is played by market shares and by the capacity available in the market. In differentiate markets, unilateral effects tend to arise particularly when the two merging companies have highly substitutable goods. Such a price make up does not depend on the merged firm being the prevalent player in the market. The likelihood and magnitude of such an increase will instead depend on the substitutability of the products supplied by the two firms the circumferent the substitute, the greater the unilateral effects.Coordinated effects arise where, under certain(a) market conditions (e. g. , market transparency, product homogeneity etc. ), the merger increases the chance that, post merger, merging parties and their competitors will successfully be able to coordinate their demeanor in an an ti-competitive way, for example, by raising prices. As in the case of unilateral effects, the most common form of coordinated effects is in the case of horizontal mergers, i. e. mergers between firms active on the same market.The main question in analysing coordinated effects should be whether the merger materially increases the likelihood that firms in the market will successfully coordinate their behaviour or strengthen existing coordination. The task is to identify what factors are credibly to lead to coordination taking place between firms post-merger. This was a controversial field of view with which competition authorities and courtyards have struggled to come to terms over the years, but experience has led to the emergence of some agreement on what conditions are most likely to give rise to coordinated effects.According to the Airtours criteria, coordination is more likely to emerge in markets where it is relatively simple to reach a common understanding on the terms of co ordination. In addition, three conditions are necessary for coordination to be sustainable. First, the coordinating firms must be able to varan to a sufficient degree whether the terms of coordination are being adhered to. Second, check out requires that there is some form of credible deterrent mechanism that can be activated if deviation is detected.Third, the reactions of outsiders, such as current and futurity competitors not participating in the coordination, as well as customers, should not be able to jeopardise the results expected from the coordination. unsloped mergers These are mergers between firms that operate at different but complementary levels in the string of production (e. g. , manufacturing and an upstream market for an input) and/or distribution (e. g. , manufacturing and a downriver market for re-sale to retailers) of the same final product.Another example is the acquisition of alphabet television network by Walt Disney to enable Walt Disney air its recent movies to large audiences. In purely vertical mergers there is no direct firing in competition as in horizontal mergers because the parties products did not grapple in the same relevant market. As such, there is no change in the level of concentration in either relevant market. upright mergers have significant potential to create efficiencies largely because the upstream and downriver products or services complement each other.Even so, vertical integrating may sometimes give rise to competition concerns. Anticompetitive effects Vertical effects can produce competitive harm in the form of foreclosure. A merger is said to result in foreclosure where actual or potential rivals access to supplies or markets is hampered or eliminated as a result of the merger, thereby reducing these companies ability and/or incentive to compete. Two forms of foreclosure can be distinguished. The first is where the merger is likely to raise the costs of downstream rivals by restricting their access to an important input (input foreclosure).The second is where the merger is likely to prevent upstream rivals by restricting their access to a sufficient customer base (customer foreclosure). However, it should be noted that in general vertical merger concerns are likely to arise only if market power already exists in one or more markets on the supply chain. Conglomerate mergers involve firms that operate in different product markets, without a vertical relationship. They may be product extension mergers, i. e. , mergers between firms that produce different but related products or pure conglomerate mergers, i. e. , mergers between firms operating in entirely different markets.In practice, the focus is on mergers between companies that are active in related or neighbouring markets, e. g. , mergers involving suppliers of complementary products or of products belonging to a range of products that is generally change to the same set of customers in a manner that lessens competition. This kind of mergers takes place when two firms in unrelated lines of business combine. A merger between a bank and a media house will be an example of a conglomerate merger. One example of a conglomerate merger was the merger between the Walt Disney Company and the American Broadcasting Company (http//www. sk. com/wiki/Conglomerate_merger) Anticompetitive effects Merger review in this area is controversial, as commentators and enforcement agencies disagree on the extent to which one can predict competitive harm resulting from such mergers. Proponents of conglomerate theories of harm argue that in a small number of cases, where the parties to the merger have strong market positions in their respective markets, potential harm may arise when the merging group is likely to foreclose other rivals from the market in a way similar to vertical mergers, particularly by means of tying and bundling their products.When as a result of foreclosure rival companies become less effective competito rs, consumer harm may result. However, it should be stressed that in these cases there is a real riskiness of foregoing efficiency gains that benefits consumer welfare and thus the theory of competitive harm pauperisms to be supported by substantial evidence. Evaluation of the potency of existing regulations aimed to reduce anticompetitive practices of Mergers and Acquisitions in Ghana.Mergers and Acquisitions among companies in Ghana are set by the Securities and Exchange Commission (SEC) under the Securities Industry natural law 1993 (PNDC Law 333) (Ghana Investment Promotion Center, 2008). The law mandates the SEC to review, approve and regulate takeovers, mergers, acquisitions and all forms of business combinations in accordance with any law or engrave of practice requiring it to do so. Ghanaian law on mergers and acquisitions is an amalgamation of some(prenominal) executive and legislative instruments passed as the bodily finance industry continues to evolve.The need to generate constructive competition among enterprises has been recognized by the government, and monopolies are actively discouraged as a result. The merger in November 2003 of two big(a) international mining companies Ashanti Goldfields and AngloGold (AngloGold succeeded in outbidding Rand Gold in the highly con-tested race with an offering of $1. 4 billion) promises great value to shareholders and the operations of both companies.The Companies Code stipulates the manner in which mergers and amalgamations should be effected. It places emphasis on company resolutions that authorize mergers and amalgamations and on the preservation of affected creditors rights. Ghanaian courts frown upon the tyrannical treatment of members or shareholders, and ample provision is made for aggrieved persons to apply to the court for redress at different stages of the merger or acquisition process. exotic enterprises are guaranteed unconditional exchangeability of profits and dividends through any ban k pass to deal in freely convertible currency, encouraging and securing unknown investment. The transfer of company shares is exempted from all stamp duties and capital gains resulting from mergers, amalgamations and reorganizations are also revenue enhancement exempt. Under Ghanaian investment law, preferential treatment is given to foreign and Ghanaian joint ventures by guaranteeing lower minimum capital requirements than those essential for wholly foreign-owned enterprises.On the whole, mergers and acquisitions in Ghana continue to evolve as the government secures an lineive environment through executive, legislative and judicial activism to attract direct foreign investment and thus improve the economy. Consequently, the local corporate finance market has began to see increasingly complex financial transactions taking place as more international companies elect Ghana as the regional centre for their operations and its courts for dispute resolution issues.