Term Paper on "Merger Activity Due in Large"

Quoted Instructions for "Merger Activity Due in Large" Assignment:

there is my proposal and in the second part you will find what you need to do thanks

first part

Table of Content

1. Title………………………………………………………………………………pg2

2. Introduction…………………………………………………………………….pg2

3. Research Aim, Questions and Objectives………………………………..pg2

4. Literature Review……………………………………………………………...pg3

4.1. The types of Merger and Acquisition…………………………………pg3

4.2. The reasons for the companies to merge…………………………….pg3

4.3. Overview of Merger and Acquisition activity in United Kingdom…..pg4

5. Methodology ……………………………………………………………………pg4

5.1. Research Approach…………………………………………………….pg5

5.2. Research Design………………………………………………………..pg6

5.3. Method of data collection……………………………………………….pg6

5.3.1. Documentary data…………………………………………………...pg6

6. Markov-Switching Model of Merger waves………………………………...pg7

7. Resources………………………………………………………………………..pg7

8. Discussion of access and ethical consideration………………………….pg7

8.1. Access……………………………………………………………………..pg7

8.2. Ethical consideration…………………………………………………….pg7

9.TIMELINE......................................................................................................pg8

10.References……………………………………………………………………….pg9

1. Title

â€A"The reasons behind waves of Mergers and Acquisitions in United Kingdom”

2. Introduction

The main goal of companies nowadays is to maximize the shareholder’s value. One of the easiest ways to achieve this is through merger or acquisition. Merger is defined as the process where the shareholders of two or several companies decide to merge into a single company. Acquisition is defined as the process where the shareholders of one company buy the ownership of another company or its assets. The increase in merger and acquisition (M&A) activity has generated a new phenomenon, which is merger wave. This phenomenon has been first observed in United States, then in United Kingdom and recently in other European countries. This dissertation will focus on the merger wave in the United Kingdom.

3. Research aim, Questions and Objectives

The basic aim for this dissertation will be to identify the causes of waves of M&A in UK. This research is relevant as it will improve our understanding of merger waves as the factors which triggers the waves are not fully understood although different theories have been identified. In addition, this research will create greater awareness about the history of merger waves in UK.

Based on the research aim, we have framed the following research questions and objectives for this dissertation.

Research Questions Research Objectives

What are the different types of M&A? To identify the types of M&A

Why do companies do merge? To identify the reasons of merge

What are the different M&A waves in UK? To identify the M&A waves which happened in UK

Is there a relationship between these M&A waves? To compare these waves

4. Literature Review

The scope of the literature review is to examine the types of merger and acquisition. To study the motivations for companies to merge and acquire in the UK. Finally the literature review will look at the different wave of M&A in UK and evaluate them.

4.1. The types of Mergers and Acquisitions

There are various types of merger and acquisition. The classification has been done on the basis of functional relationship between two companies and the economic impact of the merger on their operations (Tanriverdi, H & Uysal, V: (2010).

There are three main types of merger. First, the horizontal merger is when two companies from the same industry which are currently in direct competition merge together. It has as advantages to generate substantial economics of scale and result in decrease in the number of competitors in the industry Pawaslar, Vardhana: (2001). The other type of merger is the vertical merger which take place when a company, and perhaps one of their suppliers, join together to be able to offer a contiguous, non-interrupted supply of merchandise to their companies (***** W. Fontaine, 2007). Finally, the conglomerate merger is when two companies from different industry merge together.

4.2. The reasons for the companies to merge

Merger and acquisition have kept the interest of a lot of academia during this recent year. As they can be really beneficial for the companies involved in these processes. However it is important to note that the merger or take-over activities are not always benefits for the companies. There are different motives behind the mergers and acquisitions. According to Trautwein (1990) the motives can be categorised in different theories, to know efficiency theory, where merger is planned and executed to achieve the synergy, which can be financial, operational or managerial synergy. For example, if a particular company is very good at marketing strategies while some other company is good in operations. If the expertises of both are put together, it produces synergy. This produces a new firm with more powerful features than the individual firms had before. However although the operational and managerial synergies are really benefits for the firms, they have been the object of several critics. According to Kitching (1967) and Porter (1987) these synergies are evasive concepts that are often claimed for merger but seldom realized.

Another theory developed by Trautwein (1990) is monopoly theory, for which the reason to merge is to achieve market power. The monopoly position will allow the firm to reduce the competition, control the market price and cross-subsidize its products. Although providing some advantages to the company, it is important to note that this monopoly theory cannot be applied in horizontal acquisition. In addition, â€A"under the monopoly theory the competitors’ stock should rise under an announcement and drop if the merger is challenged” (Trautwein, 1990, p5). For Jensen (1984) since the competitors’ stocks do not fall on the two latter events, the monopoly theory should be rejected. Therefore, the monopoly theory although being cited as one of motive for merger, it faced a lot of critics which weakened this theory.

According to Ravenscraft and Scherer (1987) the fact the managers have better information about the target’s value firm than the stock market can be a motive of merger. This is considered as a valuation theory. â€A"Bidders*****' managers may have unique information about possible advantages to be derived from combining the target*****'s businesses with their own” (Trautwein, 1990, p5). However this theory can only holds in an imperfect market, as in the perfect market all the information are available to the market and no one can take advantage from the information as the price of a company reflects the truly value of the market. Therefore although this theory is relevant, it conflicts with the financial market perfection.

4.3. Overview of M&A activity in the United Kingdom

Mergers and Acquisitions are not a new thing in the United Kingdom. Five different waves have been identified since the late 19th century. The first real wave was in 1960 and coincided with the internationalization of the world economy, the British government decided that the large firms were needed in order to compete effectively in international stage (Owen, 2006). To achieve this, a lot of companies were encouraged to merge. In other hand, the post-war reconstruction had a big role in this first wave. The second wave peaked in 1972 and was characterized by horizontal mergers (Sudarsanam, 2010) the reason of this wave was the soft legislation which encouraged the merger. The third wave was in 1980, Prior to this time the waves had been mostly about increasing the size of companies but in the 1980s the emphasis changed to the control of corporate assets as a commodity (Owen, 2006). The main trigger of this wave was the Big Bang deregulation of financial services sector in the City of London (Sudarsanam, 2010). In 1990s the UK experienced its fourth merger wave which was also trigger by the deregulation of British industries. The fifth UK wave in addition to the characteristic of fourth wave (deregulation) had the privatization of firms as important stimuli of the wave.

5. Methodology

The methodology will identify the intended research approach and outline the research strategy chosen. The first part of the methodology will develop an appropriate research approach, strategy and design for the dissertation. Providing an overall explanation of methods chosen, whilst giving justification for these choices. The second part, will demonstrate more explicitly the different data collection methods intended in order to achieve the research objectives.

5.1. Research Approach

There are two research approaches that can be taken, the deductive and the inductive approach. To begin with deductive approach, which is the development of theory that will be tested, this approach is applied the most of the time for scientific research. It is considered as the top to down approach:

Theory

Hypothesis

Observation

Confirmation

Then, the induction approach which is focused on building theory. It is considered as the down to top approach:

Theory

Hypothesis

Pattern

Observation

As the research objective of this study is concerned with the cause of merger wave in the UK. This dissertation will require an inductive approach, because it will allows us to observe the factors preceding the waves, identify the types of M&A during these waves. However this approach can lack of objectivity and validity. Therefore in order to meet these issues related to validity and objectivity. This dissertation will use also the Markov- switching model of merger waves considered by Town (1992) which provide a better portrayal of M&A than simpler formulation.

5.2. Research Design

The way, we are going to answer research questions should be related to the purpose of research. A study can have different purposes such as exploratory, descriptive or explanatory.

The research purpose of this dissertation will be exploratory. Which is a valuable means of finding out what is happening, to seek new insights, to ask question and to assess phenomena in a new light (saunders, p139). This type of research design was chosen as it will allow us to review the work of academic in order to identify the relevant factors that influence the merger wave. And also enable to make a comparative analysis of different waves.

5.3. Method of data collection

There are two types of data: secondary data and primary data. For this study, we are only going to used secondary data. The secondary data is data which has already been collected for some other purpose other than the one under consideration (Webb, 2002). It can be used to provide a backdrop to primary research. Secondary data sources can help avoid unnecessary primary research and can be used to guide researchers throughout primary data collection (Webb, 2002). The secondary data which will be relevant for this study are documentary data.

Documentary data

Journals articles, organisations websites and other published materials which adequately covered the research, will be call frequently to form the literature review for this dissertation. The different journals: the journal of Applied Behavioural Science, journal of Financial Economics, International journal of Industrial Organization, journal of Applied Financial Economics, Quaterly journal of Economics journal of Economic Perspectives will play an important role in the development of review and understanding of the subject on which the research objectives are based.

The websites of Office for National Statistics and Thomson Financial will relevant in the collection of data in order to achieve Markov-Switching model analysis. The work of academia such as Sue Cartwright and Cary Cooper (1996) will be relevant in the identification of reasons of mergers. Gerald Adolph et al (2009) work on the explanation and examination of wave will be useful for this study.

Advantages and disadvantages of secondary data

In the case of this study the main advantages of using secondary data are:

ïÆ'Ëœ The saving in resources, time and money

ïÆ'Ëœ A large amount of data can be overviewed quickly and compared.

As disadvantages:

ïÆ'Ëœ Data should be evaluated carefully due to the fact there are not always of high quality and relevant for research question

6. Markov-Switching Model of Merger Waves

The literature has advanced the idea that mergers follow a wave pattern. We take this casual impression to suggest the presence of two distinct states of merger activity, high and low (Halbheer et al, 2009). We will develop different assumption such as

Assumption: Each period t is accompanied by an unobserved latent state variable. This will be tested by Markov-switching model.

7. Resources

Different resources will be needed in order to achieve this dissertation. The main ones are teesside main library and Business School library, which offer a vast range of books and journals articles related to our research objective. As other important resource is personal computer associated to the internet and Microsoft word program, as it will allow us to get access to some relevant websites and also allow us to type our research. Finally, the time can be considered as crucial factor for this research as we have a time limited to achieve this research.

8. Discussion of access and ethical consideration

For the success of research project, we are going to look at access and ethical consideration.

8.1. Access

As our research will mostly be based on secondary data, gaining access to these data will not be a problem due to our free access to the library and some websites with which the Durham University is registered. However it is important to note that some organizations’ websites are not free, which can be a barrier to access some data.

8.2. Ethical consideration

Research ethics refer to the appropriateness of our behaviour in relation to the rights of those who become subject of our work (Saunders et al, 2009, p187). As we develop our data collection techniques, we need to consider whether our research method is likely to cause any physical or emotional harm. As example of harm: no respect of cultural values, the no respect of work of academia. In order to deal with ethical issues, as our dissertation is mainly based on secondary data, we will require the consent of the other party before to use the secondary data

second part

Overview of the Project? (8000 words excluding references, bibliography and appendices)

The Project is a piece of work in which you demonstrate your ability to investigate a topical business/management issue or problem which is closely related to your programme of study. Within the project you collect, an***** and evaluate relevant information, draw supportable conclusions based on your findings and make appropriate recommendations.

As such your project could be:

A workplace or organisation-based project

If you can negotiate sufficient relevant access to an organisation, this is possibly an ideal basis for your project as it is a ready and valuable source of primary, live evidence.

Other primary research project

Rather than focussing on a workplace for your project, you may still wish to undertake a project which generates significant and valuable primary research. If you can identify access to the relevant area of your research and data sources, this could be a good option for you.

Regardless of which style of project you undertake, your final work needs to demonstrate that you can:

• Plan and manage the implementation of your research

• Understand the principles/theory underpinning the issue or problem that is being investigated

• Identify how to investigate an issue in order to reach a reliable view

• Present data and other information in a clear and logical manner using quantitative and/or qualitative methods as appropriate

• Critically an*****, interpret and evaluate data and other information

• Develop concise and logical arguments

• Draw relevant and valid conclusions and make recommendations which are appropriate to the issue or problem

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In pursuit of these objectives, your project must contain the following sections and content

• An abstract or brief summary

• An introductory section outlining the nature and context of the chosen issue or problem

• A literature review

• A research design (explaining how you have approached the task)

• A number of development sections (analysis of findings)

• A conclusion and recommendations

• A reflection on the research project process

In producing and presenting your Project you must meet the following requirements:

Presentation of the Final Project

• It should be typed or word-processed, on A4 unlined paper, on one side only, using Arial font size 12

• There should be good margins all round. Remember to allow sufficient space on the left hand side to allow for binding

• There should be double line spacing throughout, except where there are long quotations indented in the main text when single spacing is acceptable

• Pages should be numbered consecutively through the main text, including tables/charts/ diagrams which are not embodied in the text. Page numbers should be located centrally at the bottom of the page

• Any large charts or diagrams should be reduced to A4 size if possible, otherwise folded to A4 size with an allowance for binding

Project Contents

The Project should be 8000 words in length, excluding appendices. The final document should comprise the following headings and content:

ABSTRACT

Suggested approximate word count of 300 words. A summary of the project aim, research design and methods, findings, conclusions and recommendations. The summary can only sensibly be written after you have drafted all the main chapters.

ACKNOWLEDGEMENTS

An optional (unmarked) section in which you can give thanks those who have advised, supported or inspired you.

TABLE OF CONTENTS, LIST OF TABLES, LIST OF FIGURES

List in numerical order the headings of the chapters and sub-headings of the main body of the Project with the numbers of the pages on which these chapters and sections begin. You must list all appendices providing details of reference number/letter, title and page number.

List separately, after the Table of Contents, any tables, figures, diagrams or other items used in the main body of the text. List in numerical order and give the title and page number upon which it appears.

The Table of Contents is easy to add at the end, but if you are having difficulty getting started you might want to do the contents page first using the standard chapter headings and add the page numbers later.

INTRODUCTION

Suggested approximate word count of 400 words. A summarised description of what is being studied (e.g. company, industry and/or theory â€*****" but do not simply ‘cut and paste’ from a company website!). Identify the audience, i.e. who the project will be useful to and why it will be useful to them. You should put your project into context, explaining why the project area is important. It will be helpful to identify in this chapter main themes or problems your project is investigating and state why this is an appropriate project for you to carry out. Avoid too much general background information, which may distract your reader from the main issues in the project but ensure that a full context has been given.

AIMS & OBJECTIVES

Suggested approximate word count of 100 words. Clearly stated and logically derived aim and objectives. It must be clear from your aim and objectives that the project is appropriate to your programme of study and that achievement of the objectives will satisfy the project aim.

LITERATURE REVIEW

Suggested approximate word count of 2,000 words. A discussion of definitions, themes, concepts and debate relevant to your study.

- Select and critically an***** published theory and research which is relevant to your topic. You must cite academic sources to support your discussion.

- Use headings and subheadings to structure your discussion.

This section explains how the literature shaped and influenced your study. You should discuss how you propose to deal with any conflicting issues raised by the literature.

RESEARCH DESIGN & INFORMATION SOURCES

Suggested approximate word count of 1,500 words. Explanation of and rationale for the research design, methods of data collection and analysis, and the range of information sources used. Cite academic references (e.g. textbooks and sources included on the reading list) to justify and enhance the validity of your choices.

- Research design

- Primary and/or Secondary data collection sources, populations, samples.

- Methods you used to collect the data

- Methods you used to an***** this data

- Project management and control:

ï*****šÂ§ Resources and associated costs (if any)

ï*****šÂ§ Possible limitations (e.g. access, ethical issues, time constraints)

ï*****šÂ§ Measures taken to ensure that your project is completed to time and quality

You will have proposed an approach and identified data collection techniques as part of your research proposal so you should be able to draft this chapter at an early stage as this serves to outline your research plan. You should critically reflect on the methodology you have used and include a discussion of why you have chosen the particular approach and techniques. You must include a discussion here of how you will deal with issues of a confidential or ethical nature.

This chapter is a key chapter for the assessors because it explains the methods you have chosen and, in particular, why you have chosen them. Your reasoning should be justified and supported by relevant reading from research texts.

ANALYSIS & FINDINGS

Suggested approximate word count of 2,000 words. This section should an***** the findings of your research. The exact structure is not prescribed and should be

appropriate to context/’fit for purpose’. The issue to keep in mind is that there should be a logical ‘flow’ that makes your project easy to read and understand.

Results should be presented with a full discussion and interpretation. It is insufficient just to say what your findings are - you need to an***** what they mean within your work context and fully interpret them. Where you are presenting a lot of numerical data it is important to include a visual representation (e.g. graph) of major results.

Even if your findings are of a qualitative nature you should consider breaking up the text and perhaps emphasising a major point by use of a diagram (e.g. a flow-diagram to illustrate a change or implementation process). You may not refer much to the research literature at this point, but may draw on some subject based reading to support or interpret your findings.

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CONCLUSIONS

Suggested approximate word count of 600 words. A summary of key findings providing an explanation of their significance

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- Logically derived from the foregoing analysis

- Understanding of the significance of the foregoing analysis

Remember that your conclusions must be clearly drawn from your findings. Address the aim and objectives you set earlier in the Project. A common mistake is to include entirely new material in the conclusion. This is not appropriate.

The conclusions should arise logically from what has gone before. This may not be the longest chapter but it should be clear, succinct and encapsulate the important issues and findings.

RECOMMENDATIONS

Suggested approximate word count of 600 words. Recommendations for action must be included. These should be expressed in a clear and practical manner. These should be directed to your audience/stakeholders (organisations, managers, researchers) and address issues such as strategy, management decisions, and further research.

REFLECTION

Suggested approximate word count of 500 words. A personal reflection on the research project process and on the limitations of the foregoing analysis (how might these limitations affect your results?)

- Did the process of undertaking the project deviate in any way from the proposal? If so, why?

- What did you learn from the process of this research project?

- What are the limitations of the research and how might these limitations have affected the results?

- What might you do differently if conducting future research and/or if you were to do the research again?

In order to write this section effectively it is recommended that you maintain a Project Log Book throughout the duration of your project.

APPENDICES

The Appendices should contain supporting documentation, such as detailed results or tables of statistics that support the analysis, but which are too detailed to be contained in the main text. It is important that they complement the main text.

Note that the word count applies to your project chapters not the appendices. You can therefore use the Appendix Section to support and evidence the depth, as well as the breadth of your learning and activity throughout the course of your project. However, you should not include large amounts of additional information in the appendices as they are used to illustrate the discussion, not to compensate for a limited word allowance.

Clearly sectioning and labelling the contents of your Appendix enables you to illustrate and support the material that you refer to in the text of your project in the previous chapters. Contents of the Appendix Section might include, for example a copy of the questionnaire used in a survey or supporting data for quoted results.

Each Appendix should be on a separate page, designated in sequence as Appendix A, Appendix B etc., listed in the Table of Contents and referenced within the main text. Remember to provide references for sources of material used in the appendices where appropriate.

When choosing what to include in the appendices consider the following criteria:

• Timely: recent and current

• Appropriate: illustrates the points you are making

• Relevant: clearly linked to the project

• Ethical: you have permission to use it and no- one is compromised by its inclusion

• Authentic: real, rather than invented to illustrate the purpose

• Annotated: the reason for inclusion is explained

• Confidentially protected: protect names of your organisation or individuals and gain their permission to use the example

It is often useful to include entries from your Project Log in the Appendices.

The purpose of the Appendices are to illustrate your project process and are not there to compensate for a limited word number.

REFERENCE LIST

Here you must list all the sources you have referred to or quoted in the text. Use the Harvard format. Failure to include a source referred to risks being classed as plagiarism, which is a serious disciplinary issue. The reference list must be one list in alphabetical order by the author’s surname (Harvard format).

Please note:

In addition to marks for the quality of content your Project will also be marked on the basis of referencing, bibliography, structure and quality of presentation:

- Adherence to specified criteria for presentation

- Evidence of an appropriate structure

- Correct spelling and grammar and appropriate narrative style

- Evidence of proof-reading to eliminate typographical and other errors

- Correct referencing (Harvard style)