MERGERS

Motives
Synergy
Acquiring new technology
Improved profitability
Acquiring competency
Entry in new markets
Access to funds
Tax benefits
Horizontal Merger
Direct competition
Sharing same product line
Markets merge
Benefits
Staff reduction
Decrease in related cost
Economies of scale
Opportunity to acquire technology
Increase market reach
Industry visibility
Vertical Merger
Non-Competing companies
Ones product is necessary component of another
Benefits
Lower transaction cost
Synergy in design and production
Distribution of output
Can be forward/backward/Balanced
Eliminates
Searching for vendor
Contracting prices
Coordinating production
Payment collection
Conglomerate Merger
No relationship with product
No economic relationship with acquired or acquirer
Benefits
Diversification
Reduce risk exposure
Synergy
Cross selling

Merger with EPS concept
Accretive merger
Dilutive merger

In accretive acquirer has higher P/E
In dilutive acquired has higher P/E
Reasons of failure
Too Aggressive
Poor business fit
Culture issues
HR issues
Regulatory issues
Overstated
Inadequate due diligence
Board room splits