Merger and Acquisitions in Businesses

Mergers & Acquisitions in Businesses

1 · What Are Mergers & Acquisitions?

  • M&A stands for the purchase or merger of a company as a way to re‑nationalize business and respond to changes in the environment.

  • Management strategy: acquire ownership by buying shares.

  • M (Merger): The acquired company is dissolved and absorbed into the acquirer’s organization.

  • A (Acquisition): The purchased company remains intact and is managed as a subsidiary or related company.

2 · Why Companies Turn to M&A

  • Changes in social & industrial structures, human consciousness, and lifestyles.

  • Popular in the U.S. for diversifying management.

  • Overcome internal‑growth limits, save time & cost entering new projects.

  • Korean firms focus on management diversification, breaking trade barriers, and international market development.

Purpose Types

  1. Short‑term profit‑seeking: speculation.

  2. Management diversification: improve management methods.

3 · Forms & Tactics

Legal Merger Forms

Form Key Point
Merger After shareholder approval, the acquired company does not survive.
Absorption‑type One survivor; others dissolve, transferring assets, business, liabilities.
Consolidation‑type All dissolve; a new company is formed that inherits everything.

Acquisition & Defense Moves

Move         Slide Notes
Take‑over bid         Openly buy stock above market price for a set period.
Greenmail         Buy large shares, threaten management.
White Knight         Friendly outside force invited to defend against hostile bid.
Poison Pill         Deliberately reduce profitability to deter takeover.
Golden Egg         Separate key “golden egg” businesses to discourage attack.
Pac‑Man         Reverse takeover: target buys shares of the attacker.

4 · Benefits

  • Business Synergy: legal frameworks allow combined entities to harness exchange‑act, fair‑trade, tax, and accounting advantages.

  • Financial Synergy: larger size, lower bankruptcy risk, easier capital raising, reduced costs.

  • Risk Diversification: combine various companies to spread risk.

  • Proactive Planning: respond to tech, market, political, economic, social changes.

  • Tax Reduction: combine profitable and loss‑making firms to cut corporate income tax.

  • Management Revitalization: lift morale and revive undervalued or inefficient companies.

5 · Case Study — Friendly M&A in Korean Construction

Source: slide “Friendly M&A growth.”

  • Targets: Hyundai Engineering & Construction, Daewoo Engineering & Construction, Ssangyong Engineering & Construction.

  • Context: These firms recovered with public funds and creditor support after the financial crisis and then looked for new owners.

  • Nature: Classified as friendly M&A—offered voluntarily by creditors or government to collect invested public funds and bonds.

  • Pre‑Acquisition Participation: Various funds (mid‑sized firms, large firms, military mutual‑aid associations) joined before acquisition.

6 · Rising Hostile M&A (Slide Notes)

  • Conducted by secretly buying shares on the stock market to seize management rights.

  • Targets: companies weak in finance or governance.

  • Defensive effect: forces firms to keep strong finances and competitiveness to avoid becoming targets.

Closing Thoughts

M&A offers quick routes to growth, diversification, and revitalization—but sparks battles of control and defense. 

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