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2nd video on M&A

The video is focusing on the top 10 disastrous mergers and acquisitions in the business history. For this list, only considered mergers where the two parties were more or less of equal size or where the deal was at least billed as a merger of rough equals.

For examples, New York Central and Pennsylvania Railroads which at the ninth place. Their attempt to remain relevant alongside the booming auto industry. Penn Central became one of the United States' biggest corporation. Unfortunately, it could not survive with inflation, bad management, internal conflicts as well as massive cost cutting. At last, Penn Central filed for the biggest corporate bankruptcy in 1970 due to promised of $200 million government loan never materialized.

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1st video on M&A

The video is mainly about the top 10 business mergers and acquisitions of all time which are considering unions that remain standing as a single entities today. In addition, it also focusing on mergers and acquisitions deals where buying parties acquired prominent subsidiaries that helped them enter into a new market and consolidate a leadership position.

For example, based on this video, the second place held by Google and Applied Semantics. In April 2003, Google successfully purchased Applied Semantics and was further developed along with google pre-existing AdWords to create the perfect ad based machine. The reason is Google used Applied Semantics to improve its contextual targeting technology. Moreover, Applied Semantics helped accelerate the AdSense product, one which today delivers billions of dollars in revenue to Google.

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Puteri Nor Hamira Binti Hamzan (BF0105232)

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Puteri Nor Hamira Binti Hamzan (BF0105232)

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According to the Top 10 Disastrous Mergers & Acquisitions, the most disastrous merger ever for me is AOL and Time Warner. They have made a biggest mistake in corporate history. It is the number one Internet Company and the number one Media Company. Because of that, the stock price is rapidly decline and millions in lost jobs. Adoption of the new technology takes time for the normal company. Public and private policies are one of the reasons for the merger failure. The reasons of merger failure is over valuation of AOL shares has shown a dramatic impact on the deal, whereas stakeholders are not satisfied and improper communication with consumers damages the trust of user. The merger’s fail was a result not only because of the replete of the dot-com bubble but it also the failings by AOL Time Warner management to ever really integrate the two firms.

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Puteri Nor Hamira Binti Hamzan (BF010232)

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Puteri Nor Hamira Binti Hamzan (BF010232)

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According to the Top 10 Business Mergers and Acquisitions of All Time. This video focused on acquiring influential companies from purchasing parties that helped them penetrate a new market and improve the leadership position in M&A deals. The most important motive for companies to enter into mergers and acquisitions is to consolidate their strength and market share. Another attribute is Synergy, which is the magic force that allows the new company to maximize its profitability efficiencies, which takes the form of profit growth and cost savings. In order to stay competitive, companies must be required to be at the height of technical advances and their applications. The M&A of a small enterprise with innovative innovations can maintain or improve the competitive advantage of a big corporation. As an example number 6, Facebook + Instagram = Facebook (2012). Kevin Systrom and Mike Krieger launched Instagram in October 2010. Instagram has grown to become one of the company’s most popular mobile apps and has been multiplying its amount of active users extensively.

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Farhan Ikram (BF0105028)        Video on M&A 2

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Farhan Ikram (BF0105028)        Video on M&A 2

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Based on video Top 10 Disastrous Mergers & Acquisitions (M&A), they only considered mergers where the two parties were more or less of equal size, or where the deal was at least billed as a merger of rough equals. On my opinion, this video tell us about disadvantages of business through merger and acquisition as such prevents economies of scale. We can see that in cases where there is little in common between the companies, it may be difficult to gain synergies. Also, a bigger company may be unable to motivate employees and achieve the same degree of control. Thus, the new company may not be able to achieve economies of scale. For example, standing at number eight is Kmart and Sears (2005), both Kmart and Sears continued to fail as Sears Holdings. With the subsequent recession uncovering problems like poor investment and shrinking revenues. It also mention that the higher prices of the company’s goods increased its irrelevance against retail giants like Walmart.

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Farhan Ikram (BF0105028)        Video on M&A 

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Farhan Ikram (BF0105028)        Video on M&A 

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Based on video Top 10 Business Mergers and Acquisitions of All Time, they were focusing on M&A deals where buying parties acquired prominent subsidiaries that helped them enter into a new market and consolidate a leadership position. On my opinion, this video tell us about advantages of growing the business through an acquisition or merger as such diversification of the products, services and long-term prospects for the business. It seems that a target business may be able to offer us a product or services which we can sell through our own distribution channels. For example, standing at number five is Exxon Mobil Corp. (1998), tying the knot in 1999, Exxon Mobil is now dominating its oil and gas rivals in terms of revenue and coincidentally aligning with its place on this list is the fifth largest in the world.

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Video on M&A 2 FAREEQ HAKIMI (BF0104671)

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Video on M&A 2 FAREEQ HAKIMI (BF0104671)

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Based on the video of "

Top 10 Disastrous Mergers & Acquisitions (M&A) show that not all merger & acquisitions give a good impact on the company and some of them become worse. Although the M&A will give you the opportunity to monopoly or gain more territory of the certain industry, they also will be sharing the burden that have been acquire by the company before the merge like poor management in financial or strategic geographic market area. Example like Kmart+Sears (2005). On the video says that the company have a problem because of the store is not near the customer. It also because of the poor investment and shrinking in revenue that make a company in the bad shape. Now in 2020  most of the Sears and Kmart company gone closing most of the store.

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NUR AMIRA NAZIRA BINTI MOHD NAZIR (BF0104887)

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NUR AMIRA NAZIRA BINTI MOHD NAZIR (BF0104887)

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Market power theory- firm merge in order to increase market share and hence profit. Market power advocates claim that merger gains are the result of increased cooncentrstion leading to collusion and monopoly. the theory posts that the merger take place to increase theoir market share, means by increasing the size of the firm relative to other firms in an industry.

an objection is often raised against permitting a firm to ncrease its market share by merger is that the result will be undue concentration in the industry. on contrary, some hold that increasd concentration is generally the result of active and intende competition.

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Candice Khiew Chian Thing (BF0104468) Video on M&A 2

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Candice Khiew Chian Thing (BF0104468) Video on M&A 2

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The video is on top 10 most disastrous mergers in business history. The list only considers almost same size companies.

Standing at number 10 are 2 Internet companies, Excite and @Home for $6.7 billion.
Reasons of merger:
1. concern about increase competition
2. to attract millions of subscribers

Failure Reasons:
1. NASDAQ systematic breakdown
2. culture clash between Excite.com bubble and @Home more corporate and conservative cable business.

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Through videos on the top 10 business (M&A) mergers and acquisitions all the time. This shows that M&A deals where buyers acquire leading subsidiaries that help them enter new markets and incorporate leadership positions. it can help companies and industries grow more widely and increase profits more than operating as a single company. example as shown in No. 5 is Exxon + Mobil which became Exxon Mobil Corp in 1998. Exxon Mobil is now the largest oil and gas industry manufacturer

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Video on M&A 2 Candice Khiew Chian Thing BF0104468

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Video on M&A 2 Candice Khiew Chian Thing BF0104468

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The video on top 10 most disastrous mergers in business history. The list only considers mergers of almost equal size companies.

Standing at number 10, Excite and @Home (Internet companies) for $6.7 billion.
Reasons of merger:
1. concerned about competition
2. to attract millions of subscribers

Failure Reasons:
1. NASDAQ systematic breakdown
2. culture clash between Excite.com bubble and @Home more corporate and conservative cable business

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The merger of two firms into one relates in simplified terms. One of the reasons for a merger was, according to differential theory, that when the A management becomes more effective than the B management, then best when company A acquires company B and raises the productivity level of company B.

According to this theory, it is better for certain companies to operate at levels below the optimal potential of the company than for others. This hypothesis further means that a business management is not effective in the service of the company and that other firms are more going to take it over.

Differential theory may be particularly helpful in cases where a company decides to take over another company in the same industry as it would allow the company that takes over another company to grow at great cost due to the efficient use of all resources. However, there is a risk that the company is paying too many for the acquisition of the company, but in reality, the resources are not used in a way that is predicted as it can lead to company acquisition difficulties.

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Theory agency is value of a principal-agent relationship is not optimized because the two contracted parties may have different interests and information is asymmetric (not equal). Agency costs are the result of principal and agent conflicts of interest and disagreements regarding actions that are taken. As such, monitoring and incentive-alignment systems are used to curb costs associated with opportunist behavior. Agency theory is commonly utilized to understand and explain corporate governance phenomena, including executive incentive alignment, board monitoring, and control of top managers; this strand of the literature is founded in economics and represents the bulk of the research in business and management. However, other important principal-agent relationships are commonly seen in business and society such as with politicians, investors, and clients, and have benefited from the vast stream of research that has explored the principal-agent relationship in various forms and contexts. For this video is,
•Accessing funds or valuable assets for new development. Better production or distribution facilities are often cheaper to buy than built. Finding a target business that is only slightly profitable and has a large unused capacity can increase a company's profits if they merge it can market both products for the company's profit.

•Obtaining quality staff or additional skills, knowledge of your industry or sector and other business intelligence business with good management systems and processes will be useful for buyers who want to improve themselves. Ideally, the business you choose should have a system that complements your business and that will adapt.

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Candice Khiew Chian Thing (BF0104468) Video on M&A 1  

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Candice Khiew Chian Thing (BF0104468) Video on M&A 1  

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The video is about the top 10 business mergers & acquisitions of all time which are not necessary the largest deal but they remain standing today.

Purpose of M&A:
1. help them enter a new market
2.to consolidate a new leadership position

Standing at number 6 is Facebook + Instagram = Facebook (2012)

Instagram is launched by developer Kevin Systrom and Mike Krieger as a platform for sharing photos or videos in Oct 2010 and was acquired later on for 1 billion U.S. dollar. Now, Instagram has around 130 million users and the number is growing.

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Puteri Nor Hamira Binti Hamzan (BF0105232)

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Puteri Nor Hamira Binti Hamzan (BF0105232)

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Strategic realignment to changing environments

Strategic alignment theory suggests that firms use the strategy of M&As to quickly adjust to changes in their external environments.

Strategic planning is concerned with the firm’s environment and its constituencies. The strategic planning approach to merger implies that there is a possibility of achieving economies of scale or using the underutilized managerial capacity of the firm.

It may also mean that by external diversification the firm acquires management skills needed for increasing its present capabilities.

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SITI ATIYAH MARIAM BINTI YAHYA (BF0104915)

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SITI ATIYAH MARIAM BINTI YAHYA (BF0104915)

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Undervaluation theory - firms merge because one firm is undervalued.
- It relies on the assumption that the market is inefficient: the market price of the target company does not reflect the present value of its expected future cash flows.
-Once it has bought the target firm, the bidding firm can either hold on to it reaping an exceed return on its investment, or it can re-sell it.
-Sometimes the bidding firm will split the target firm up into its component divisions and sell these separately. This is know as asset stripping.

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Synergy Gain Theory
M&A are done to get synergistic benefits out of the
combined firm that is of acquirer and target together.
The value of combined firm is likely to be greater
than the acquirer and target firm separately. The gains
arise out of the financial or operating synergies though
economies of scale of operations. It means when the
two firms combine, their fixed cost is distributed
among the large scale of productions leading to less
fixed cost. Apart from the economies of scale, there is
another variant of it which is called as economies of
scope where the complementary resources of the
acquirer and target firm are combined to bring synergy
gains. For example, the acquirer is good at marketing
and target is good at its research division, they
combined to produce a new product and market it.
Most of the M&A have a motive to increase the size
of the company. This is possible when two firms
combine to get the benefits of economies of scale and
scope. Economies of scale occur in various ways. It
may occur because of the huge scale of operation or it
may occur by holding inventories or through
specialisation. Economies of scope occur when a
company manufactures some related goods at lower cost as it enjoys the experience of dealing with the
existing products

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Pure diversification
Pure diversification theory of mergers differs from shareholder portfolio diversification. Shareholders can efficiently spread their investments and risk among industries, so that there is no need for firms to diversify for the sake of their shareholders. Managers and employees, however, are at a greater risk if the single industry in which their firm operates should fail, their firm specific human capital is not transferable. Therefore, firms may diversify to encourage firm specific human capital investments which make their employees more valuable and productive and to increase the probability that the organization and reputation capital of the firm will be preserved by transfer to another line of business owned by the firm in the event its initial industry declines.

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Process theory – it views mergers as strategic decisions not as
comprehensive rational choices but as outcomes of processes
influenced by decision process, organisational routine and political
power.

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Process theory – it views mergers as strategic decisions not as comprehensive rational choices but as outcomes of processes influenced by decision process, organisational routine and political power.

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1. The synergy hypothesis suggests that the value of the combined firm is higher than the sum of the individual firm values. Besides that, synergy hypothesis also stated that management of merged company shall create value on behalf of the shareholders and they needs to have the competence to measure the value of the combined firm.
2. Private benefits hypothesis. Merger and acquisition activity is driven by personal interests whereby the manager obtains and maximizes its welfare at the expense of acquirer shareholders.  Private benefits motivate the management of acquiring firms by engaging in mergers and acquisitions, may be able to extract value for themselves in several ways. For example, under managerial control, if a company has an excessive cash flow, the manager is more likely to further entrench management and increase personal interests by spending the cash on low-benefit or even value-destroying mergers rather than distribute dividends to stockholders.

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Theory that support concept M&A                 FAREEQ HAKIMI (BF0104671)

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Theory that support concept M&A                 FAREEQ HAKIMI (BF0104671)

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Diversification is one of the concept that support
Merger & Acquisitions. Diversification means expansion in terms of either geography or product range or both. Diversification and its attached benefits like reputational benefits,preserving reputational capital and demand for diversification by managers and employees. It helps in increasing the corporate debt capacity and decrease the present value of future tax liability. These results in stability of cash flow even if there is variability through mergers. Mergers are considered better route for diversification than internal growth because the timing and availability of requisite resources do not match through internal growth. For example like EID Parry acquired Nutraceuticals Co, and Valensa International(2008) go for M&A to access market in the United States and European Union countries that would help in cross selling in the global market.

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Market Power Theory
Market power theory argues that merger gains are the result of increased concentration leading to collusion and monopoly effects. Merged firm by limiting the competition can earn super-normal profit and strategically employ the.surplus funds to further consolidate its position and improve its market power. The market power enhances the profit margin of the merged firm either by increasing the prices to be paid by the buyers or by forcing the suppliers to accept lower prices or by reducing the compensation payable to the employees.

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One theory that supports Merger and  Acquisition, which is the theory of Synergy.  Synergy refers to the type of reagent that occurs when two substances or factors combine to produce a greater effect together than the sum of the two operating independentlts could account for. The ability of a combination of two firms to be more profitable individually than the two firms.

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Muhammad Nursyahmi Bin Norayeen ( BF0104932) 

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Muhammad Nursyahmi Bin Norayeen ( BF0104932) 

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Diversification theory
Firms merge to reduce the business risk. risk-management technique that  combines a broad variety of equity assets. A diversified portfolio includes a mix of distinct types of assets and investment

vehicles in an attempt to limit exposure to any one asset or risk. this theory is related M&A Tenaga Insurance Berhad + People Insurance Company (Malaysia) Berhad (PICM) =TAHAN INSURANCE (2003)

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Agency Theory

The Agency is, in general terms, any partnership between two parties in which one, the agent, represents the other, the principal, in day-to-day transactions.

The Principal or Principal has hired an agent to provide a service on their behalf.

Principals shall delegate the decision-making power to the officers.

Since the agent makes several decisions that impact the principal financially, differences of opinion and even differences in priorities and interests can arise.

It is often referred to as the dilemma of the main agent.

By interpretation an agent is using a principal's resources.

The principal has entrusted money, but has little to no input on a daily basis.

The agent is a decision maker but is incurring little to no risk as any risks would be borne by the principal.

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What say you?

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Top 10 Disastrous Mergers & Acquisitions (M&A)

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- Differential Efficiency Theory

The differential efficiency theory assumes that there are two types of firms on the basis of their efficiency, efficient firms and less efficient firms. The differential efficiency theory also assumes that an efficient firm acquires less efficient firm and increases the level of efficiency of such a firm to the level of efficiency of acquiring firm. The level of efficiency in the economy would be raised by such mergers and therefore, mergers are considered to be of social gain. The theory suggests that there are firms with below average efficiency or that are not operating up to their potential. It is further suggested that firms operating in similar kinds of business activity would be most likely to be the potential acquirers

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what say you on this?

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Top 10 Business Mergers and Acquisitions of All Time

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Question for discussion.

Discuss one theory that support the concept of Merger and Acquisitions(M&A).