1. What are the differences between merger and acquisition?
Answer:
Merger: Merger refers to the coming together of two entities to form an entirely new business, often at par.
Acquisition: Acquiring refers to the process through which one business buys another and then incorporates that business into its own.
2. What are the steps of the M&A process?
Answer:
Strategy Formulation: Objectives and the selection of targets are identified.
Due Diligence: Financial information, operations, and risks in the target organization are evaluated
Negotiation: Terms for the deal.
Regulatory Approvals: Obtaining legal and regulatory compliance.
Integration: Combining operations, systems, and cultures after the deal.
3. How is the value of a company determined in an M&A deal?
Answer:
Company valuation takes into account, among other things:
Financial statements (e.g., EBITDA, cash flow).
Market conditions and industry trends.
Intellectual property and assets.
Synergies expected from the transaction.
Methods used include discounted cash flow (DCF), comparable company analysis, or precedent transactions.
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4. What is due diligence, and why is it important?
Answer:
Due diligence requires a careful examination of the target’s financial, operational, legal, and risk-related aspects. This would ensure that the right decisions were made as well as point out certain red flags that might affect the deal.
5. What are the most common legal risks in M&A?
Answer:.
Regulatory Compliance – antitrust or competition law violations.
Undisclosed Liabilities .
Contractual Issues .
Cultural Integration – organizational values and practices not aligned.
6. How do M&A deals affect employees?
Answer:
Effects may include downsizing, role changes, or cultural adjustments. Openness and clear communication are essential in retaining talent and ensuring a seamless transition.
7. How are M&A transactions financed?
Answer:
Financing can be in the form of:
Cash: Direct acquisition using company cash.
Stock Swaps: Issuance of shares to acquire the target.
Debt Financing: Loans or bonds.
Combination: A combination of the above.