The Merger of Allianz Group and Dresdner Bank
1. Introduction
In our days mergers and acquisitions are a predominant feature of the international business system as companies attempt to exploit new market opportunities and to strengthen their market positions. Each year sets a new record for the total value of mergers and acquisitions and nearly every day new announcements are made in the business newspapers.
In the literature one finds a large number of explanations for the occurrence of mergers and acquisitions. Sometimes, these explana-tions are also applicable to related forms of interindustrial links such as joint ventures or strategic alliances. Therefore it is necessary to define the term merger and acquisition as it will be used throughout this paper.
1.1 Definition of the Term Merger and Acquisition
Two different phenomena are described by the term merger and acquisition. A merger is a combination of two corporations in which only one survives and the merged corporation goes out of existence. It is a unification of two or more firms into a new one and thus characteri-zed by the fact that after unification there are fewer firms than before. On the contrary can the target firm after an acquisition either remain autonomous or be partially and/or wholly integrated into the new parent company. However, from a legal point of view the firms remain independent entities.
In most of the cases, one company acquires the majority or minority equity stake in another which is not a true merger in the legal sense. The two companies are not legally united, but form an economic unit where both remain legally independent, a so-called quasi-merger. The term acquisition mainly is used when more than 50% of a
company's equity are purchased, i.e. the buyer gains complete control over its target. Equity stakes of lesser percentages are referred to as minority holdings.
In spite of the legal difference between mergers and acquisi-tions, both terms are often used together. In international business the expression merger and acquisition, abbreviated M & A, or only merger, has become a general term referring to all kind of activities which are related to the selling and buying of a company. It includes classical mergers and acquisitions as well as management-buy-outs and management-buy-ins, minority equity purchases, joint-vent...
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...t boost of the operation profitability, a leaner portfolio and reduction of complexity and (the Plus One) sustainable increase of the competitive strength and value. The management expected to increase the total premium income by about 4%.
Similarly Dresdner Bank started in August 2003 the so-called "New Dresdner" program with the following steps: By the end of 2003 the operational performance was stabilized and at the beginning of 2004 the cost-cutting program adopted and the implementation started. By mid 2004 the revenue growth initiatives started as well as the imple-mentation of the new business model and for end of 2004 a positive net income was expected. By mid 2005 the "New Dresdner" will be imple-mented and by the end of this year cost of capital will be earned.
Indeed, the results of last year which just now have been published show that 2004 was a year of profitable growth for Allianz. There was a significant increase in the operating profit which rose by €2.8 billion to €6.9 billion and the net income reached €2.2 billion. The banking segment Dresdner Bank reported an operating profit of €603 million in 2004 (operating loss of €369 million in 2003).
The purchase of the parent company would be financed with all equity. An individual or team of investors would pay the purchase price and they would receive equity in the Runway Fashion Exchange parent company. The value of the equity would increase as the compan...
fail (Cheng, 2012). Mergers and acquisitions are much common in these days and only a few of them are end up in successes. Even though mergers and acquisitions are not result much successes rate, many organizations are still preferring it because, it is used as a cooperative strategy but nowadays it is used for cooperative development. The cultural differences and merger integration can be considered as an important factor for the failure rate but this study mainly focused
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
The desired outcomes from cost reductions, such as reducing the workforce by almost half and eliminating management bonuses, are to reduce cost of goods and increase operating income. Although Harnischfeger’s cost of sales (COS) has increased from 1983 to 1984, the company appears to have reduced COS in comparison to sales from 81% to 79%. In addition, it has increased its Operating Income from $62 million in 1983 to $90 million in 1984.
The purpose of this paper is to attempt to recompile information about the merger of two corporations; one of many taking places i...
Tremendous managerial changes came when Richard Brown appointed as Chief Executive at EDS. He believed reducing excess labour cost will have positive impact on the company’s profit, therefore with introducing of this new business model worked positively and could be the result of higher revenue in 2000.
The soft factors can make or break a successful change process, since new structures and strategies are difficult to build upon inappropriate cultures and values. These problems often come up in the dissatisfying results of spectacular mega-mergers. The lack of success and synergies in such mergers is often based in a clash of completely different cultures, values, and styles, which make it difficult to establish effective common systems and structuresBased on the case study, extensive research and annual reports of AT&T the writer has mapped AT&T in the different domains. AT&T should strive to attain a perfect circle as close to the centre as possible, which indicates total synergy, order and equilibrium. Where the circle is skewed drastic change is needed as it moves closer to the outer ring of chaos:
Dewar, R. a. (2006). Washington Mutual: A Very Old Bank Can Grow - A Lot! Harvard Business Review .
An acquisition can be defined as the consolidation of companies or assets. This is basically when one company is purchased by another and as a result, no new company is formed. There are several different drivers of a successful acquisition; these comprise of due diligence, strategic drivers, and aligning cultures.
Impact on Financials –ability to generate revenue and increase profits with the launch of RLK’s new product and ability to obtain higher cost savings.
Companies merge and acquire other companies for a lot of strategic reasons with different degree of success. The success of a merger is measured by whether the value of the acquiring firm is enhanced by it. The impact of mergers and acquisitions on organization can be small and big in other cases.
Some studies either debated that CSR is preferred over the VRS or stated that the use of VRS requires carefulness (Fethi and Pasiouras, 2010). In the analysis of this paper, TE and SE are evaluated under the VRS assumption preferentially. The assumption of CRS is said to be suitable only at the time where the entire banks are functioning at an ideal level (Fethi and Pasiouras, 2010; Coelli, 1996). Two of which that may result in banks not functioning at an optimum are imperfect rivalry and finance restraints (Coelli, 1996). Thus, recently several studies assessed models of DEA under the VRS.
Mergers and acquisitions immediately impact organizations with changes in ownership, in ideology, and eventually, in practice. There are multiple reasons, motives, economic forces and institutional factors that can, taken together or in isolation, influence corporate decisions to engage in mergers or acquisitions. The financial risks of merging with or acquiring an organization in another country and how those risks can be mitigated are important issues for corporations to conduct research on. This paper will examine the sensible and dubious reasons for mergers and acquisitions and the benefits and costs of the cash and stock transactions.
Owing to the operating costs reduction and the increased revenues, the company’s profitability level will definitely increase. In addition, increased market share will lead to higher level of sales and therefore higher profit levels.
When entrepreneurs plan their business future they will consider how they can increase their business size or profit in a short period. Entrepreneurs may consider growing their business or company by using a merger or an acquisition. These methods can be a speed up tool and a short cut to enlarge their business. (Burns, 2011) Also they can reduce competition, make it easier for entrepreneurs to think about the market and product development and risk reduction. Furthermore, some lesser – known companies can improve their firm’s image and market power by using merger and acquisition with larger firms. However, there may be risks associated with merger and acquisition related to lack of finance and time. (Burns, 2011) This essay will discuss more deeply the advantages and disadvantages of using mergers and acquisitions, showing how it can affect firms and market with the case study.