Pros and cons for takeover and merger
1. Distinguish:
Takeover and merger are very similar corporate actions - they combine two previously separate firms into a single legal entity.
A merger involves the mutual decision of two companies to combine and become one entity; "equals", which combine to become one legal entity with the goal of producing a company that is worth more than the sum of its parts.
For example, back in 1998, American Automaker, Chrysler Corp. merged with German Automaker, Daimler Benz to form DaimlerChrysler.
A takeover is characterized by the purchase of a smaller company by a much larger one. This combination of "unequals" can produce the same benefits as a merger, but it does not necessarily have to be a mutual decision.
An example of an acquisition would be how the Walt Disney Corporation bought Pixar Animation Studios in 2006. In this case, this takeover was friendly, as Pixar's shareholders all approved the decision to be acquired.
2. Pros of Takeover:
To the internal environment
Increase in sales/revenues.
Increased efficiency.
Increase in economy of scale
Profitability of target company
(Tuan)
To the external environment
Venture into new businesses and market. Enlarge brand portfolio.
Increase market share.
Decreased competition (for the acquiring company)
Reduction of overcapacity in the industry
Disney is famous for fairy tales stories and pencil drawed animation. After buying Pixar, Disney now also known as one of the best 3D animation producers in the world.
3. Cons of Takeover:
To the internal environment
Goodwill
Monetary cost
Corporate culture clashes between employees and conflict with new management.
Lack of motivation for the acquired company.
To the external environment
Reduce choices for the customers
Job cuts
4. Pros of merger:
To the internal environment
Greater efficiency. Redundancies can reduce if the available employees work effectively.
Better R&D. The new firm will have more profit which can be used to finance risky
Takeover and merger are very similar corporate actions - they combine two previously separate firms into a single legal entity.
A merger involves the mutual decision of two companies to combine and become one entity; "equals", which combine to become one legal entity with the goal of producing a company that is worth more than the sum of its parts.
For example, back in 1998, American Automaker, Chrysler Corp. merged with German Automaker, Daimler Benz to form DaimlerChrysler.
A takeover is characterized by the purchase of a smaller company by a much larger one. This combination of "unequals" can produce the same benefits as a merger, but it does not necessarily have to be a mutual decision.
An example of an acquisition would be how the Walt Disney Corporation bought Pixar Animation Studios in 2006. In this case, this takeover was friendly, as Pixar's shareholders all approved the decision to be acquired.
2. Pros of Takeover:
To the internal environment
Increase in sales/revenues.
Increased efficiency.
Increase in economy of scale
Profitability of target company
(Tuan)
To the external environment
Venture into new businesses and market. Enlarge brand portfolio.
Increase market share.
Decreased competition (for the acquiring company)
Reduction of overcapacity in the industry
Disney is famous for fairy tales stories and pencil drawed animation. After buying Pixar, Disney now also known as one of the best 3D animation producers in the world.
3. Cons of Takeover:
To the internal environment
Goodwill
Monetary cost
Corporate culture clashes between employees and conflict with new management.
Lack of motivation for the acquired company.
To the external environment
Reduce choices for the customers
Job cuts
4. Pros of merger:
To the internal environment
Greater efficiency. Redundancies can reduce if the available employees work effectively.
Better R&D. The new firm will have more profit which can be used to finance risky