In a general sense, mergers and takeovers are very similar corporate actions - they combine two previously separate legal entity. Significant operational advantages can be obtained when two firms are combined and, in fact, the goal of most mergers and acquisitions is to improve company performance and shareholder value over the long term.

The motivation to pursue a merger or acquisition can be considerable; a company that combines itself with another can experience boosted economies of scale, greater sales revenue and market share in its market broadened diversification and increased tax efficiency. However, the underlying business rationale and financing methodology for mergers and takeovers are substantially different.

A merger involves the mutual decision of two companies to combine and become one entity; it can be seen as a decision made by two "Equals". The combined business, through structural and operational advantages secured by the merger, can cut costs and increase profits, boosting shareholder values for both groups of shareholders. A typical merger, in other words, involves two relatively equal companies, which combine to become one legal entity with the goal of producing a company that is worth more than the sum of its parts. In a merger of two corporations, the shareholders usually have their shares in the oldcompany exchanged for an equal number of shares in the merged entity. For example, back in 1998, Anerican Automaker, Chryseler Corp, merged with German Automaker, Daimler Benz to form DaimlerChrysler. This has all the makings of a merger of equals as the chairmen in both organisations became joint leaders in the new organisation. The merger was thought to be qite beneficial to both companies as it gave Chrysler an opportunity to reach more European markets and Daimler Benz would gain a greater presence in North America.

A takeover, or acquisition, on the other hand, is characterised by the purcahse of a smaller company by a much larger one. This combination of "unequals" can produce the same benefits as a merger, but it does not necessarily hve to be a mutual decision. A larger company can initiate a hostile takeover of a smaller firm, which essentially amounts to buying the company in the face of resistance form the smaller company's management. Unlike in a merger, in an acquisition, the acquirig firm usually offers a cash price per share to the target firm's shareholders or the acquiring firm share's to the shareholders of the target firm according to a specified conversion ratio. Either way, the purchasing company essentially finances the purchase of the target company, buying it outright for its shareholders. An example of an acquisition would be how the Walt Disney Corporation bought Pixar Animation Studios in 2006. In this case, this takeover was friendly, as Pixar's shareholders all approved the decision to be acquired.

Target companies can employ a large number of tactics to defend themselves against an unwanted hostile takeovers, such as including covenants in their bond issues that force early debt repayment at premium prices if the firm is taken over. 

In a general sense, mergers and takeovers are very similar corporate actions - they combine two previously separate firms into a single legal entity. Significant operational advantages can be obtained when two firms are combined and, in fact, the goal of most mergers and acquisitions is to improve company performance and shareholder value over the long term.

This article was from http://www.investopedia.com/ask/answers/05/mergervstakeover.asp

It has enlightened me in distinguishing the main difference between a merger and a takeover with good elaboration and evidence. I always had this impression that merger would be equivalent to a takeover as there is bound to be a comparatively larger firm out of the two, who will be capable and wealthy enough to buy over the smaller firm. However, after reading this article and the previous one I posted about, it is evident that merger will not result in takeover most of the time, if both parties negotiate well and maintain an amiable partnership. If both parties remain warm and welcoming, both will benefit in terms of their investment in shares and profits in time to come. However, in a takeover, the small firm gets swallowed up and if this scenario takes place more often in future, we might just end up with a few monopolies in the market without any competition. Therefore. I feel that the issue of merger between two firms should be done with careful deliberation and thought before execution, as a hostile relationship or something that has not been negotiated and agreed upon properly, might result in a takeover.

Posted by: Zelei

I chanced upon an article on this website: www.capstonemarketing.com

The emphasis to merge for the right reasons is indeed important as this article has shown me how a merger can make or break the success of a firm. The very fact that many mergers, as stated in this article, have failed over three years, shows that this so-called attraction for a better tomorrow or a so-called solution to low profits or supernormal profits earned by a firm does not necessarily guarantee the nice way out.

One point I would like to take away with me after reading this article: that the effects of merger are different for almost every field of practice. It will encourage me to think out of the box and analyse each question on a case-by-case basis, and push me to veer away from regurgitating facts from the notes as they might not be relevant to certain questions in a different context.

posted by: Zelei

this is an article about how Australians view Singapore and it talks about the competition between Singtel and Starhub in an oligopoly..

Sussing out Singapore
Eric Ellis
July 28, 2001
TIM Fischer, Australia's former deputy prime minister, likes to remind people of his years of expertise "networking" South-East Asia.
So when he advises Australians not to fret about Singapore Inc, as he did last month as Singapore government-owned companies eyed strategic Australian assets, he expects his take to carry weight.
But to hear Kerry Stokes of the Seven Network and Qantas boss Geoff Dixon describe Singapore Inc, it's almost as if some omniscient Dr No figure is sitting back in the air-conditioned city state, perhaps stroking a cat while armed with billions of Singapore dollars plotting world domination, or at least Australian domination.
So who's right about Singapore Inc? Fischer and some former colleagues in the Howard cabinet who will probably decide on sensitive bids by Singapore Airlines and Singapore Telecommunications? Or the self-interested Stokes and Dixon and their almost jingoistic brand of economic nationalism?
Singapore itself offers some insight – in particular a website, http://www.singapore-inc.com, registered by the island's premier planning agency, the Singapore Government's Economic Development Board.
Says the EDB site: "The Singapore Unlimited vision articulates Singapore's aspirations to become a first league developed nation and its strategies to enhance its economic activities in an integrated, holistic manner, using a total approach to systems.
"Through the co-operation and support of all parties – political leaders and government, institutions and academia, chambers of commerce and trade associations, industrialists and labour, foreign investors and local companies, the people, and all who have identified themselves to be the nation's stakeholders – the vision for Singapore will be achieved in harmony and with measurable success.
"Together, these stakeholders form Singapore Inc, working together like entities in a large corporation, each responsible for a specific aspect of Singapore's value chain, each working as a part of the team to support and add value to our business partners."
The EDB is an institution at the heart of Singapore Inc. Its chairman is Philip Yeo, one of Singapore Senior Minister Lee Kuan Yew's most trusted lieutenants and the type of Singaporean most foreign investors in Singapore think of when they speak of its impressive civil service.
If Lee Kuan Yew is the architect of modern Singapore, then Yeo is his senior draftsman, entrusted with luring multi-nationals to set up in Singapore, something which he has successfully executed, as any drive around Singapore's outer reaches suggests. Names like 3Com, Sony, Philips and Hewlett-Packard abound.
John Howard might deride branch-office economics but Singapore has made an economic philosophy out of it. Singapore is South-East Asia's richest and most economically equitable country.
A member of French phone giant Alcatel's international advisory board, a position he shares with World Economic Forum founder Klaus Schwab, Yeo was strongly rumoured last year (pre-tech wreck) to be joining Richard Li's Pacific Century group, Telstra's partner in Asia.
In Singapore, joining the private sector doesn't necessarily mean leaving public service. Senior Minister Lee Kuan Yew himself is a case in point. His son, Deputy Prime Minister Lee Hsien Loong, last year told Singapore's parliament that Lee Kuan Yew's membership of the advisory boards of car maker Daimler-Chrysler, financial giant JP Morgan and oil major Total helped the Senior Minister realise that Singapore needed to aspire to global standards to remain a player in the world market.
Yeo is at the heart of a fascinating national interest debate within Singapore: whether to continue what modern Singapore has been famously successful at – providing a user-friendly Asia Lite for hi-tech multinationals to exploit – or to discard that model and secure Singapore's future offshore with massive investments in secure economies.
In Singapore, Lee Kuan Yew's word is gospel and more recently he and his junior ministers have been exhorting Corporate Singapore to go forth and multiply beyond the island's cosy business community that Lee has described as microbe-free. He has ranked Singapore companies at just just three to four out of 10 on a scale of global competitiveness and reckons offshore competition would raise that level.
Putting the pieces together, it becomes clearer why famously micro-managed Singapore wants to pick off key Australian assets.
South-East Asia is hardly a secure investment right now. Indonesia and Malaysia are in penury and/or political turmoil, and often suspicious of wealthy Singapore, which sometimes sees itself almost as a Kuwait or an Israel, a prosperous state surrounded by hostile neighbours.
Relations with the Jakarta of presidents B.J. Habibie and Abdurrahman Wahid have been unsteady. Habibie famously derided Singapore as a red dot (of Chineseness) in a green (for Islamic) sea while the capricious Wahid openly sought Malaysia's co-operation in turning off Singapore's water supply, mostly piped in from Malaysia. Relations with the ascendant Megawati are expected to be warmer.
Relations with Kuala Lumpur, Singapore's once and perhaps future political parent, are cautious and frequently fractious. Lee Kuan Yew has been to Malaysia, Singapore's closest neighbour, just once in 11 years. And Malaysia has irritated Singapore by building a massive port almost next to Singapore and then luring some of Singapore's best foreign clients away with sweet deals.
Like any investor, Singapore Inc likes to get both bang for its buck and some certainty of a reliable operating environment, neither of which Asia can offer after the 1997-98 financial crisis.
But Australia, once derided by Lee Kuan Yew as white trash, has been that place since the 1997-98 financial crisis. And compared with Singapore's neighbours, Australia provides an open and buoyant economy, and a transparent and largely corruption-free one to boot.
It's not surprising, then, that Singapore Inc is extending its reach into Australia, with component companies taking out key infrastructural assets. Singapore Power controls Victoria's main electricity utility, PowerNet. SingTel is bidding for Optus and SIA for Ansett via Air New Zealand. Singapore Port Authority is rumoured to be seeking port operator Lang Corp, while Singapore's biggest bank, DBS, came close to a merger with Australia's Westpac late last year. Each of these Singaporean companies is controlled by Temasek Holdings, which is wholly owned by Singapore's Ministry of Finance.
Interestingly, this push offshore comes as Singapore attempts to deregulate its business sector. SingTel now faces competition from a host of new players, notably StarHub (which ultimately traces its control to the Singapore government) and next year Singaporean power users will have a choice of utilities as the SingPower monopoly breaks down. The Government also wants to privatise its holding in the port authority and is encouraging new competition in the banking sector.
The Singapore Government denies any connection between these various institutions' efforts in Australia, or elsewhere for that matter. Still, the boards of many of these companies, at the heart of the Singaporean economy, often seem a merry-go-round of connected interests.
The chairman of SingTel, Koh Boon Hwee, is also a director of SIA and about to become its chairman. SIA's current chairman, Michael Fam, is a member of the influential Council of Presidential Advisers and is a director of the media giant Singapore Press Holdings (SPH). Singapore president S.R. Nathan is a former boss of the press group.
The presidential council signs off the accounts of the powerful Government Investment Corp, which is chaired by Lee Kuan Yew and deputy-chaired by his son Lee Hsien Loong. Hsien Loong's brother is chief executive of SingTel. His wife chairs main SingTel competitor StarHub and is chief executive of government-owned Singapore Technologies. PSA board member Sim Kee Boon is also on the presidential council and is a director of Temasek, as is SingTel/SIA's Koh Boon Hwee.
Another presidential councillor, Lim Kim San, is executive president of SPH. His number two at SPH, Tjong Yik Min, recently resigned from SIA and is also chairman of Singapore's aviation regulator. SIA chairman Michael Fam is an SPH director, as is SIA chief executive Cheing Choong Kong.
Another SIA director, Ho Kwon Ping, is the ex-chairman of Singapore Power and also on the GIC board. The PSA board is littered with directors and officials of DBS Bank. DBS president Jackson Tai is on the SingTel board. His colleague Ng Kee Choe is chairman of Singapore Power.
The ties between Singapore and Australia are long and deep. Singapore's cabinet and business community is littered with alumni from Australian universities, many of them Colombo Plan scholars. Many of Singapore's major institutions and laws are fashioned after Australian models.
The father of the Australian car industry, Sir Laurence Hartnett, was a friend and adviser to Goh Keng Swee, Lee Kuan Yew's first finance minister and architect of Singapore's state-controlled economy.
And the relationship is mutually beneficial. Singapore is Australia's best friend in South-East Asia, Canberra's most reliable avenue of continued engagement in the region.
Despite the recent visit to Canberra by Wahid, Indonesia remains suspicious of Australia in the aftermath of the East Timor independence struggle. And in Malaysia, Mahathir agitates at every opportunity to keep Australia out of the region.
No surprise, then, that Australia and Singapore are enthusiastically pursuing a bilateral free trade agreement, a move which has angered both Malaysia and Indonesia, who see it as contrary to ASEAN's famous but often dysfunctional policy of regional consensus.
Australia's military involvement in East Timor has also been a watershed. TV images of burly, technologically enabled Australian troops sorting out Indonesia's mess were compelling to a nation that plays host to American naval and air force bases.
A projection of military muscle is best anchored by economic pull and Australia is the one country in this part of the world that has boomed.
And the way tightly controlled Singapore sees it, that's good enough reason to park some cash, perhaps permanently.

- Elissa

Supply and Demand

Video on supply and demand. for kids. =P

www.youtube.com/watch?v=TWBLFLLGK10

Other demand and supply cartoons.

~Terri. :)

Eg. of a monopoly: De Beers

De Beers is a typical example of monopoly.
It is almost the sole seller of diamonds.
(sells almost 90% of world production)
Sells a commodity with no close substitutes
(created this illusion by advertising)
It restricts output and it responds to changes in market

So here's some background information on De Beers. Might need it for your essays.=)

De Beers is a cartel of companies that trade in rough diamond exploration, diamond mining and diamond trading. Founded by Cecil Rhodes, the various companies within the De Beers "family of companies" are responsible for around 40% of world diamond production by value.

De Beers is active in every category of diamond mining: open-pit, underground, large-scale alluvial, coastal and deep sea.

De Beers has a presence in 25 countries, largely on account of its extensive exploration activities. Mining takes place in Botswana, Namibia, South Africa and Tanzania. Mining in Botswana takes place through the mining company Debswana, a 50-50 joint venture with the government of Botswana. In Namibia it takes place through Namdeb, a 50-50 joint venture with the government of Namibia. Mining in South Africa takes place through De Beers Consolidated Mines (DBCM), a partnership with the broad based black economic empowerment partner, Ponahalo Investments. In Tanzania it occurs through a partnership with the government of Tanzania, 75% owned by De Beers, 25% by government. In 2007, De Beers is expected to open its first mine in Canada (called "Snap Lake", Northwest Territories, Canada).

The sales and marketing arm of De Beers is a company called the Diamond Trading Company (the DTC). This company sells almost half of the world’s rough diamonds by value. Other diamonds sold through the DTC include those purchased from the Russian diamond mining company Alrosa, although that relationship is due to end in 2009 after a ruling by the European Commission, the EU's anti-trust watchdog, effectively establishing Alrosa as a direct competitor to De Beers from that time. The DTC also creates and develops marketing programmes to stimulate interest in, and demand for, diamonds and diamond jewellery.

The rough diamonds sold by the DTC are purchased by a group of the world’s leading diamantaires known as sightholders. Sightholders buy tailored assortments of rough diamonds from a blended (or aggregated) “mix” of diamonds from the different mines. These clients are chosen following assessment against a set of objective selection criteria according to their ability to add value to diamonds as well as their audited adherence to the DTC’s Diamond Best Practice Principles, which cover business ethics, the Kimberley Process Certification Scheme and the industry’s System of Warranties, labour standards, health and safety as well as environment.

~Terri=)

microsoft VS linux!

hello!

here's an interesting monopoly-related article ((:

Laptops for poor to run Windows XP

[pic above: XO PC (aka the “$100 computer” that costs $200) is now available with Windows XP which is distributed by One Laptop Per Child Foundation, of Cambridge]

My review:
In my opinion, Windows XP, might push the price of an XO in more developed countries. In fact, Microsoft is making its popular operating system available for $3 per XO, which is probably close to the actual marginal cost to Microsoft of producing additional copies of XP.

Sometimes when companies like Microsoft act in the pursuit of their own self-interest, society as a whole benefits. In economics, this is identified as predatory pricing.

Microsoft and Linux, are competing for a larger foothold in developing countries where more new PC users are likely to emerge in the future.

`tiffany

ALso, I guess most of you have forgotten most of the economic concepts so hopefully the following videos will help jumpstart your memories :)

Remember opportunity cost?



Song about elasticity. Its really very interesting and it deals with the different elasticities of demand.



~Nianci!