Allen Pandey

FE-02726

25 July 2023

Fintech is growing rapidly but Internet Access, Government compliance and Data
Security is

where it is still facing many challenges."What are the key drivers and challenges of fintech
adoption in

the financial services industry?"

“Communication is a Key Element of a Successful Merger”

What Are Mergers and Acquisitions (M&A)?

financial assets through business-to-business financial transactions. A business can completely

buy out and absorb another business, combine with it to form a new business, take over some or

all of its key assets, make a tender offer for its stock, or launch a hostile takeover. They are all

M&A activities.

An acquisition is a takeover in which one business buys another and positions itself as the new

owner.

On the other hand, a merger is the coming together of two businesses that are roughly the same

size in order to continue forward as one new organisation rather than continuing to be owned and

run independently.
This process is referred to as a merger of equals. As an illustration, when the two businesses

joined, Daimler-Benz and Chrysler both ceased to exist. Instead, a new corporation called

DaimlerChrysler was born. Stocks of both firms were relinquished, and fresh stock of the

combined company was issued in their place.

In February 2022, the business underwent another name change and ticker change to become the
Mercedes-Benz Group AG (MBG) as part of a brand makeover.
When both CEOs concur that working together is in the best interest of their respective

businesses, the purchase agreement is also referred to as a merger.

Acquisitions are always considered to be unfriendly or hostile takeovers in which the target

company do not want to be purchased. Depending on whether the acquisition is friendly or hostile

and how it is announced, a transaction can be categorised as either a merger or an acquisition. In

other words, the difference is in the way the board of directors, staff, and shareholders of the

target company are informed about the sale.

Process of M&A (Mergers and Acquisition)

The length and complexity of the transaction will determine how many steps there are in the

M&A process. The activities of a firm include mergers and acquisitions. To create a new entity or

carry out one of their respective functions, two entities may combine all or a portion of their

assets.

M & A transaction is divided this into eight broad steps:

1. Developing Strategy
2. Identifying and Contacting Targets
3. Information Exchange
4. Valuation and Synergies
5. Offer and Negotiation
 –
6. Due Diligence
7. Purchase Agreement
8. Deal Closure and Integration

#1 – Developing Strategy

The first step in the M&A process is to devise a plan that takes into account a variety of factors.

The buyer first determines the motivation for the mergers and acquisitions process, the kind of

deal they want to make, and the amount of money they are willing to spend on it. When

developing the strategy, the buyer takes into account some of these aspects.

#2 Identifying and Contacting Targets

After the buyer has come up with the M&A strategy, they start looking for potential market targets

that meet their requirements. The buyer begins contacting the potential targets to express interest

after completing a list of all of them. This step's primary objective is to learn more about the

targets and gauge their interest in a transaction of this kind.

#3 – Information Exchange

After the first meeting is fruitful and both parties have expressed an interest in moving forward

with the deal, they begin the initial documentation, which typically entails submitting a Letter of

Intent to express their formal interest in the deal and signing a confidentiality agreement

guaranteeing that the deal's proceedings and discussions will remain private. The entities then
exchange information, such as company history and financials, so that both parties can evaluate

the benefits of the deal to their respective shareholders more accurately.

#4 – Valuation and Synergies

Once each side has more information about the other they begin to evaluate the item and the

contract as a whole. The seller will try to set a good price that would result in the shareholders

benefiting from the transaction. The seller is trying to estimate a reasonable offer for the item.

The buyer will also try to assess the synergy in M and A that they will get from this deal in terms

of cost reduction, increase in market power, etc.

Once the buyer has completed its valuation and appraisal, it will make an offer to the target's

shareholders. This offer can be a cash offer or a stock offer. The seller analyses the offer and

negotiates a better price if he feels the offer is not reasonable. This step can take a long time to

complete, as neither party wants to empower the other by appearing to rush the deal. Another

common obstacle at this stage is that sometimes there may be more than one potential buyer if the

target is a very attractive unit. So, there is often competition between buyers to offer a better price

and terms for the goods.

#6 – Due Diligence

Once the property has accepted the buyer's offer, the buyer begins due diligence on the property

unit. Due diligence consists of a thorough examination of all aspects of the target entity, including

products, customer base, financial books, personnel, etc. The purpose is to ensure that there are no

inconsistencies in the information previously provided to the buyer. for which the offer was made.

If there are discrepancies, this may lead to a review of the offer to confirm the actual data.

#7 – Purchase Agreement

Assuming all went well, including board approvals and anti-trust laws in effect, both parties will

begin drafting a definitive agreement outlining the cash/stock to give to the target shareholders.

It also includes when such payments is made to target shareholders.

Upon completion of the sales contract, both parties sign the documents and the buyer takes

control of the item. Once the transaction is completed, the management teams of both entities will

work together to integrate them into the combined entity.

Regulations of M&A Transactions

Process regulations for mergers and acquisitions are as follows -

1- Antitrust – M and A processes are very strictly regulated because they can disrupt a fair and

just market. M and A transactions require government approval. If the government finds

that the transaction is against the public interest, it imposes restrictions on competition and

rejects the transaction.

2- Laws - Various laws have been enacted to control M&A transactions and to ensure that

they are not contrary to public interest. For example, the Williams Act requires disclosure

when a company buys more than 5% of another company.

Conclusion:
M and A deals happen regularly and sometimes they are friendly events and sometimes they are

hostile. They help companies grow in the same industry and expand into new industries. The

process for M and A transactions can be long or short depending on the complexity and size of the

transaction. The time may also depend on the required official approvals.
 –

Sources:

1. Medium

2. LinkedIn

3. Wikipedia