MANAGEMENT INFORMATION SYSTEM

ASSIGNMENT #

BY:

 MUHMMAD FAROQ AHMAD

 WASIF ALI

 HASSAN MANSOOR BUKHARI

TO:
 MR. TAHIR ILLYAS

UNIVERSITY OF MANAGEMENT AND TECHNOLOGY

LAHORE
  Case Study

MANAGING IT IN THE MERGER AND ACCQUISION

The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate
strategy, corporate finance and management dealing with the buying, selling and
combining of different companies that can aid, finance, or help a growing company in a
given industry grow rapidly without having to create another business entity.

Acquisition

An acquisition, also known as a takeover or a buyout, is the buying of one company (the
‘target’) by another. An acquisition may be friendly or hostile. In the former case, the
companies cooperate in negotiations; in the latter case, the takeover target is unwilling to
be bought or the target's board has no prior knowledge of the offer. Acquisition usually
refers to a purchase of a smaller firm by a larger one. Sometimes, however, a smaller firm
will acquire management control of a larger or longer established company and keep its
name for the combined entity. This is known as a reverse takeover. Another type of
acquisition is reverse merger, a deal which enables a private company to get publicly
listed in a short time period. A reverse merger occurs when a private company that has
strong prospects and is eager to raise financing buys a publicly listed shell company,
usually one with no business and limited assets. Achieving acquisition success has
proven to be very difficult, while various studies have showed that 50% of acquisitions
were unsuccessful.[citation needed] The acquisition process is very complex, with many
dimensions influencing its outcome.

Merger

n business or economics a merger is a combination of two companies into one larger

company. Such actions are commonly voluntary and involve stock swap or cash payment
to the target. Stock swap is often used as it allows the shareholders of the two companies
to share the risk involved in the deal. A merger can resemble a takeover but result in a
new company name (often combining the names of the original companies) and in new
branding; in some cases, terming the combination a "merger" rather than an acquisition is
done purely for political or marketing reasons.
Distinction between Mergers and Acquisitions

Although they are often uttered in the same breath and used as though they were
synonymous, the terms merger and acquisition mean slightly different things.

When one company takes over another and clearly established itself as the new owner,
the purchase is called an acquisition. From a legal point of view, the target company
ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be
traded.

In the pure sense of the term, a merger happens when two firms, often of about the same
size, agree to go forward as a single new company rather than remain separately owned
and operated. This kind of action is more precisely referred to as a "merger of equals".
Both companies' stocks are surrendered and new company stock is issued in its place. For
example,
In the 1999 merger of Glaxo Welcome and Smith Kline Beecham, both firms ceased to
exist when they merged, and a new company, GlaxoSmithKline, was created.

In practice, however, actual mergers of equals don't happen very often. Usually, one
company will buy another and, as part of the deal's terms, simply allow the acquired firm
to proclaim that the action is a merger of equals, even if it is technically an acquisition.
Being bought out often carries negative connotations, therefore, by describing the deal
euphemistically as a merger, deal makers and top managers try to make the takeover
more palatable. An example of this would be the takeover of Chrysler by Daimler-Benz
in 1999 which was widely referred to in the time, and is still now, as a merger of the two
corporations.

Effects on management

A study published in the July/August 2008 issue of the Journal of Business Strategy
suggests that mergers and acquisitions destroy leadership continuity in target companies’
top management teams for at least a decade following a deal. The study found that target
companies lose 21 percent of their executives each year for at least 10 years following an
acquisition – more than double the turnover experienced in non-merged firms.[7]
Major M&A in the 1990s
Top 10 M&A deals worldwide by value (in mil. USD) from 1990 to 1999:
Transaction value (in mil.
Rank Year Purchaser Purchased
USD)
Vodafone Air touch
1 1999 Mannesmann 183,000
PLC[12]
2 1999 Pfizer Warner-Lambert 90,000
3 1998 Exxon Mobil 77,200
4 1998 Citicorp Travelers Group 73,000
5 1999 SBC Communications Ameritech Corporation 63,000
Air Touch
6 1999 Vodafone Group 60,000
Communications
7 1998 Bell Atlantic GTE 53,360
8 1998 BP Amoco 53,000
9 1999 Qwest Communications US WEST 48,000
10 1997 WorldCom MCI Communications 42,000

Major M&A from 2000 to present

Top 9 M&A deals worldwide by value (in mil. USD) since 2000:

Transaction value (in

Rank Year Purchaser Purchased
mil. USD)
Fusion: America Online
1 2000 Time Warner 164,747
Inc. (AOL)
Smith Kline Beecham
2 2000 Glaxo Welcome Plc. 75,961
Plc.
Shell Transport &
3 2004 Royal Dutch Petroleum Co. 74,559
Trading Co
4 2006 AT&T Inc. BellSouth Corporation 72,671
AT&T Broadband &
5 2001 Comcast Corporation 72,041
Internet Svcs
6 2004 Sanofi-Synthelabo SA Aventis SA 60,243
Spin-off: Nortel Networks
7 2000 59,974
Corporation
8 2002 Pfizer Inc. Pharmacia Corporation 59,515
9 2004 JP Morgan Chase & Co Bank One Corp 58,761
Target Firm IT Categories
We can divide the target firms IT into four categories.

 Transactional system that perform the basic transaction of the firm

 Information system that inform management about the state of operations
 Strategic system that differentiate the firm in the market place
 Basic infrastructure that includes both the hardware and software installed

Questions

Ans1

The risk involved when the target company may have stopped spending on maintenance
years ago to decrease costs competitors in new increase profit. It may have fallen behind
competitors in new applications; software licenses may not be transferable to the new
company without significant new fees. It might be possible that target company system
may b totally incompatible with the acquire system.

Ans2
The firm often fail to take the target firms information system and IT infrastructure when
you will need a value there potential contribution to the new firm.

There are four options.

 Keep the target company system if they are better than your own.
 Keep the target company system and retire the target company system if yours are
better.
 Choose the best of both companies system.
 Use the M&A to build an entirely new infrastructure.

Ans3
Although at present the majority of M&A advice is provided by full-service investment
banks, recent years have seen a rise in the prominence of specialist M&A advisers, who
only provide M&A advice. These companies are sometimes referred to as Transition
Companies, assisting businesses often referred to as "companies in transition." To
perform these services in the US, an advisor must be a licensed broker dealer, and subject
to SEC regulation. More information on M&A advisory firms is provided at corporate
advisory.