Takeovers, Acquisitions and Mergers have become accepted forms of Corporate growth, particularly since the 1950's. Additional returns to shareholders from acquisition activity occurs in less than 50% of acquisitions. Whether failure to provide additional shareholder benefits relates to the Management takeover motives, post-acquisition corporate structure, type of takeover, or poor analysis and target choice prior to the takeover, is unknown.
This report initially provides a brief discussion on the types of takeovers consisting of amalgamation, acquisition, basic mergers and purchase of assets and looks at the economic classification of acquisitions which cover horizontal, vertical and conglomerate takeovers.
To ensure an effective investigation is carried out criteria and objectives for the takeover should be detailed covering such areas as growth, risk reduction, improving the competitive position and taxation advantages.
Many specialist skills are necessary during the investigation process therefore specialist assistance should be sought from professionals in law, finance, securities industry, data processing and financial analysis.
An industry and company strategic analysis is necessary to ensure that the criteria and objectives are achievable within the selected industry environment. The strategic analysis addresses issues such as competition, industry growth and technology.
Takeovers within the Australian environment is overseen by a comprehensive legislative framework with the Companies Act. Acquisition of Shares Act and Trade Practices Act being the dominant legislative considerations. Important sections within these acts are examined and defenses against takeovers are also discussed within this framework.
Takeover strategies may have a considerable effect on post acquisition performance especially where liabilities may exist. Asset and share acquisitions are explored with a discussion the advantages and disadvantages of a formal share offer.
No acquisition is possible with suitable financing. Sources of finance such as banks insurance companies and management investment are available to build specialist finance packages that may include equity financing, mezzanine debt and senior debt components.
The report has taken a practical "hands on approach' to the issues that are required to be addressed. This necessitated approaching a considerable number of professionals active in the merger and acquisition industry, so as to elicit what they considered to be the active issues.
Relevant texts, journals, newspapers, and conference papers provided up to date details particularly with respect to legislative issues.
The report does not aim at being an in-depth guide or analysis for pre-acquisition issues but attempts to set a framework from within which the manager may guide and relate to the professionals, with whom he works, in the pre-acquisition investigation.
It is clear for an effective investigation, skills in law, data processing, market analysis, finance, and negotiation, need to be sought.