Answer / g.naveen kumar

Merger is Restricted to a case of assets and
liabilities,amalgamation is an arrangement.Main difference
b/w merger and acquisition is their mode of finance.In
merger will be occur b/w two similar size companies existed
as a new company.Mode of payment is in stock swap. But in
acquisition to unequal companies becoming one.And mode of
financing may involve cash and debt combination.

Answer / tarun agarwal

acquisition and takeover are similar,
there are two types of takeover
1-voluntary acquisition
2- Hostile acquisition
whereas
Merger means-

A merger refers to the process whereby at least two companies combine to form one single company. Business firms make use of mergers and acquisitions for consolidation of markets as well as for gaining a competitive edge in the industry.

Merger types can be broadly classified into the following five subheads as described below.

They are Horizontal Merger, Conglomeration, Vertical Merger, Product-Extension Merger and Market-Extension Merger.

Horizontal Merger refers to the merger of two companies who are direct competitors of one another. They serve the same market and sell the same product.

Conglomeration refers to the merger of companies, which do not either sell any related products or cater to any related markets. Here, the two companies entering the merger process do not possess any common business ties.

Vertical Merger is effected either between a company and a customer or between a company and a supplier.

Product-Extension Merger is executed among companies, which sell different products of a related category. They also seek to serve a common market. This type of merger enables the new company to go in for a pooling in of their products so as to serve a common market, which was earlier fragmented among them.

Market-Extension Merger occurs between two companies that sell identical products in different markets. It basically expands the market base of the product.

Answer / vikas kumar

Merger and amalgamation are almost similar, here by merging
two companies one new comany orises or may one exists and
loses it's virtue.In acquition most of time both the
companies remian what they are, only the ownership changes
and acquirer shows it's books after consolidation of other
company.
the major difference is in merger both companies records
their data in same books but in acquition it is not always,
most of time it is not.

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Sean Alicandri, a sophisticated investor who is both willing and able to take risk, has just noticed that Mid- West Airlines has become the target of a hostile takeover. Prior to the announcement of the offer to purchase the stock for $72 a share, the stock had been selling for $59. Immediately after the offer, the offer the stock rose to $75, a premium over the offer price. Such premiums are often indicative that investors expect a higher price could occur if a bidding was erupts for the company or if management buyout of the firm. Of course, if neither of these scenarios occurs, the price of the stock could fall back to the $72 offer price. In addition, if the offer were to be withdrawn or defeated by management, the price of the stock could fall below the original stock price. Alicandri has no reason to anticipate that any of these possibilities will be the final outcome, but the realizes that the price of the stock will not remain at $75. If a bidding war erupts, the price could easily exceed$100. Conversely, if the takeover fails, he expects the price to decline below $55 a share, since he previously believed that the price of the stock was overvalued at $59. With such uncertainty, Alicandri does not want to own the stock but is intrigued with the possibility of earning a profit from a price movement that he is certain must occur. Currently there are several three months put and all options traded on the stock. Their strike and market prices are as follows: Strike Price Market Price of Call Market Price of Put $50 $26.00 $0.125 55 21.50 0.50 60 17.00 1.00 65 13.25 1.75 70 8.00 3.50 75 4.25 6.00 80 1.00 9.75 Alicandri decides the best strategy is to purchase both a put and a call option (to establish a straddle). Deciding on a strategy is one thing; determining the best way to execute it is quite another. For example, he could buy the options with the extreme strike price (i.e. the call at $80 and the put at $50). Or he could buy the options with the strike price closest to the original $72 offer price (i.e. buy the put and the call at $70). To help determine the potential profits and losses from various positions, Alicandri developed profit profiles at various stock prices by filling in the following chart for each position: Price of the stock Intrinsic Value of the Call Profit on the Call Intrinsic Value of the Put Profit on the Put Net Profit $50 55 60 65 70 75 80 85 To limit the number of calculations, he decided to make three comparisons: (1) the purchase of two inexpensive options-buy the call with the $80 strike price and the put with the $60 strike price, (2) the purchase of the options with the $70 strike price, and (3) the purchase of the options with the price closest to the original stock price (i.e., the options with the $60 strike price). Construct Alicandri’s profit profiles and answer the following questions. 1) Which strategy works best if a bidding war erupts? 2) Which strategy works best if the hostile takeover is defeated? 3) Which strategy works best if the original offer price becomes the final price? 4) Which of the three positions produces the worst result and under what condition does it occur? 5) If you were Alipcandri’s financial advisor, which strategy would you advise he establish? Or would you argue that he not speculate on this takeover?

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