Mergers & Acquisitions

The 1980's consisted of hostile takeovers and leveraged buy-out acquisitions.  Corporations sought to acquire others through aggressive stock purchases and would follow up by spinning off undesirable divisions of the acquired company.  The 1990's were the decade of friendly mergers which were dominated by the telecommunications, financial services, and the technology sectors.  This was a period of mega mergers which included the merger between Exxon and Mobil.  However, M&A slowed during the beginning of the 21st century.  M&A volume decreased by 40% in 2002.  In 2003, M&A made a comeback as worldwide M&A grew by 14%.  Acquisitions are specifically defined as when a company takes over another company and becomes the new owner.  The target company ceases to exist and the acquiring company consolidates the business.  When a corporation acquires another company, the stock of the company being acquired usually rises while the acquiring companies stock may decline.  Mergers happen when two companies combine to create a new company.  The stock of both companies is tendered and new company stock is issued in its place.  For example, both Chrysler and Daimler-Benz ceased to exist when their firms merged, and a new combined company, DaimlerChrysler was created.  Mergers and Acquisitions represents one of the most intense and demanding areas of investment banking.  Public and private corporations often use M&A to implement corporate strategy and as a result, professionals in this area of finance must always be available to deliver their expertise to the client.  Many transactions do not have the luxury of time and are developed and executed immediately.  M&A professionals work in a high pressure environment where astute financial, legal, and strategic expertise is demanded.  Professionals begin their careers primarily analyzing financial models and developing new ideas or “pitches” for generating new deals.  After mastering these fundamental skills, responsibilities increase and the professional begins executing live transactions.  Successful M&A professionals are aggressive, self-confident, and have the ability to quickly solve complex financial problems under a high degree of pressure.