lecture 3 Mergers and Acquisitions Overview

These flashcards cover key terms and concepts related to mergers and acquisitions, including definitions, strategies, and implications of transactions.

M&As?

When two companies join together or one company buys another.

Merger?

When two companies combine to start one brand new company together.

Acquisition?

When a big company buys a smaller one and takes control.

Hostile buyout?

When a company is bought even though the bosses said "no way!"

Bank helpers?

People who give advice and help find the right price for a company.

Bosses buy it?

A management buyout (MBO), where the bosses buy the company from the owners.

Loan buy?

A leveraged buyout (LBO), which means buying a company using mostly borrowed money.

3 merger types?

1. Side-by-side (Horizontal)

2. Up-and-down (Vertical)

3. Mixed (Conglomerate)

Same job merger?

A horizontal merger; two companies doing the exact same thing joining up.

Maker + Seller?

A vertical merger; when a factory joins the shop that sells its goods.

Different types?

A conglomerate merger; two companies in totally different businesses joining.

What is synergy?

Making extra value by working together: (1 + 1 = 3)

Why join up?

To grow bigger, save money, and get new tools.

Defensive moves?

Clever tricks used to stop another company from buying them.

The Referee?

The Competition Authority, who makes sure deals are fair for everyone.

Why sell shares?

Owners like to sell because they often get extra prize money.

News talk?

Talking to reporters to make people think the deal is a smart idea.

Final price?

The value of the company plus extra "sweetener" money to say yes.

What is TSR?

The total money an owner makes: TSR = \frac{(Price{new} - Price{old}) + Dividends}{Price_{old}}

New places?

Joining let's a company sell its toys in new cities or countries.

Pac-Man move?

The company being hunted turns around and tries to buy the hunter first.

Worker impact?

Some lose jobs, but the buyer tries to keep the smartest workers.

Why it's hard?

Making two different teams work as one big happy team is very difficult.

Careful checking?

Due diligence; looking at every detail before spending any money.

Biggest mistake?

Paying way too much money to buy a company.

Lawyers?

People who make sure everyone follows the important rules.

Bad results?

Losing money or the two teams not liking each other.

What is goodwill?

The value of being famous and liked by all the customers.

Why fail?

Bad planning or guessing the money wrong.

Smart secrets?

Inventions and secrets (IP) that make a company worth much more.

The vibe?

If companies have a different "feeling" or way of working, they might clash.

Double check?

Checking later to see if everyone is happy and money is being made.

Staying safe?

Keeping the price high so it's too expensive for others to buy you.

Share-swap?

Trading pieces of the new company instead of using cash.