The Mergers and Acquisitions

Introduction:

This article talks about the how the company creates the value through the mergers and acquisitions that to in when the economy in down trend. This article look at the private equity prospective also. This article talks about what are the benefits for buyers and what are the benefits for seller because of the mergers and acquisition.

Key Points :

 The company value measured mainly by using P/E multiple that is price to earnings multiple.

 From 2001 to the P/E multiple of S&P 500 companies has declined by 61% from 46.5 to 18.1 percent.

 The long term P/E multiple is 15%.

 According to BCG research mergers and acquisitions will have higher chance of creating value compare to uptrend.

 The private equity has eased pressure on valuation multiples and making deals more attractive. An economic down trend will create greater opportunity for corporate buyers to generate superior value.

 Buyers can increase their returns by acquiring small companies in the down trend because in the down trend small companies will not survive.

 Public to public transaction will give positive returns but in a smaller returns for not only buyer but also to the seller.

 The sustainability of a merger and acquisition mainly depends up on the economic climate.

 One of the advantage of the credit crunch for corporate buyers is that it has reduced the competitive pressure for deals especially from PE firms.

 From 2006 to 2007 deal values and volumes increased by 19.3 percent and 54.7 percent respectively.

 During the economy down trend the value of private equity firms came down private equity shifted to mergers and acquisitions.

 The best private equity firms also faced difficult situation during the down trend in