Acquisitions, Takeovers, and Mergers

Acquisitions, which include mergers and takeovers, are a part of business strategy involving the combination of two or more businesses, with or without the cooperation of all parties. Once a rare occurrence, these maneuvers became a typical part of doing business on a large scale in the 20th century (though the peak came earlier, in the 19th century's Great Merger Movement). Mergers and acquisitions advisory firms have even developed-sometimes calling themselves transition advisors-although most such guidance is still provided by traditional investment banks.

Mergers and acquisitions (or M&A) are more often referred to collectively than not, but are not synonymous. They simply involve many of the same complications and concerns. Further, many mergers are in actuality acquisitions, but termed mergers in order for the acquired company to save face, a condition frequently included in the written agreement. On the other hand, a hostile takeover, when the purchased company resists being acquired, is never called a merger. At least half of acquisition attempts fail, though companies may try repeatedly, and failed attempts can still leave the attempted acquisitor with significant control of the target company. When NASDAQ abandoned its efforts to acquire the London Stock Exchange (LSE), it sold off the shares of stock it had acquired-nearly a third of the LSE-to the Borse Dubai, a stock exchange holding company of the United Arab Emirates.

Advisory

When a financial adviser says he is “in mergers and acquisitions,” he usually means he is in corporate advisory, either with an investment bank or with a specialty advisory firm. M&A is the bread and butter of corporate advisory, but the field includes other maneuvers and transactions, such as the privatization of a public company, the spin-off of a portion of a company into a new business, and the management of joint ventures between businesses. The advisers included in such transactions include legal advisers and financial advisers retained by both sides and looking out for the best interests of their respective clients; financiers who arrange funding and attend [Page 18]to other financial concerns of the transaction; and third-party experts, such as consultants specializing in the industry, intellectual property valuation advisors, public relations firms, and so on. The larger the companies involved, the more advisers will generally be called upon, but at a minimum each company will retain legal services, and nearly always at least one financial adviser.

Investment banks like JPMorgan, Goldman Sachs, Morgan Stanley, and Deutsche Bank offer corporate advisory services around the world, and dozens of other investment banks operate regionally or nationally. The strength of an investment bank is its tendency to have fingers in so many pies, a sort of department store of corporate financial services, and although the 2007–08 economic crisis has demonstrated the way in which this becomes a vulnerability, it renders an investment bank's M&A advice no less useful. But since the end of the 20th century, more and more firms have launched offering corporate advisory services exclusively, and have especially been engaged by businesses concerned about investment banks' potential conflicts of interest. Most such firms are run by senior executives who have left investment banks and have considerable experience, networking contacts, and professional relationships in the financial industry. They are sometimes hired to supplement the advice of an investment bank rather than to substitute for it.

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