Mergers and Acquisitions: Principles and Practices

Mergers and acquisitions (M&As) have been part of the corporate experience for over a century and most successful companies rely heavily on them to attain their strategic goals faster, cheaper, and less risky than through organic expansion (Poniachek, Harvey A., ed. 2019. Mergers and acquisitions: A practitioner’s guide to successful deals. World Scientific; Bruner, Robert F. 2004. Applied mergers and acquisitions. University edition. Wiley Finance). M&As cover a wide range of transaction types that are complex and risky, are subject to intensive regulations related to securities issuing, antitrust, and corporate governance that often require the services of various professionals, which are predominantly procured from outside the corporation. Post-merger integration is vital, and its efficient application could assure successful deals. The M&A market has globalized, and cross-border business have become quite significant. Covid-19 medical crisis promoted alternative deals that could achieve the same objectives with limited upfront investment and risk. M&A transactions are expected to yield synergies from reduction in cost, and expansion of sales and earnings. Expected synergies could affect the valuation, which is an art and science that applies primarily through the income and market approaches. This chapter surveys the main theories and forms of M&As, and addresses the principles and analytical methods for decision-making. We discuss the legal framework, including issues relating to antitrust, corporate governance, and anti-takeover defenses, accounting, leverage buyouts (LBOs), payment methods and their implications, valuation, and cross-border deals.