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http://dspace.dtu.ac.in:8080/jspui/handle/repository/18466| Title: | Major Project Report on Analysis and Prediction of Mergers & Acquisitions |
| Authors: | BANSAL, ANUREET RAO, KUNAL |
| Keywords: | Machine Learning, Mergers Acquisitions and imbalance learning Edited Nearest Neighbour Extreme Boosting Algorithm |
| Issue Date: | 31-May-2021 |
| Abstract: | Sustaining in a highly competitive market is difficult and a challenge that the company looks to overcome by providing the best to customers than the existing options available. To diversify their operations and attain the position of the market leader, most companies opt for Mergers or acquisitions for having power or success in this changing environment. The black swan events have resulted in many Mergers, Acquisitions, and takeovers due to firms not able to adapt to changing times and the constantly innovating firms acquiring such targets which would benefit them in the longer term. In this project, we aim to study and explore the multi-class prediction problem of identifying the status of the company whether it should opt for mergers, acquisitions, IPO, or continue in operating mode. Firstly, we provide exploratory data analysis using popular data visualization tools to gain useful insights from Crunchbase and WorldBank datasets. Secondly, we propose a novel method to address the prediction problem to identify the status of the company using machine learning techniques. We have employed various under-sampling methods to deal with the problem of imbalance in the dataset. Also, we incorporate the additional factors like macroeconomic variables and Intellectual property rights of the home country which are considered useful from an M & A perspective. We have performed experiments to determine the best-performing model among machine learning techniques like Logistic Regression, K-nearest neighbor, Random Forest, and XG Boost and compare the results with the baseline modeling using appropriate evaluation metrics. The Edited Nearest Neighbour under-sampling technique presents the best results using K-nearest neighbor and closely followed by XGBoost Classifier Model. Experimental results demonstrate that the proposed approach outperforms the existing methodology adopted by the researchers in the past. |
| Description: | INTRODUCTION In an era where the world is becoming highly competitive, it becomes difficult to sustain. With this increasing competitiveness, the number of businesses in a particular domain or field also keeps on increasing. Every new company aims to provide the best to customers than the existing options available. In a need to have the most power or succeed, most companies opt for Mergers or acquisitions. The term M&A which is a common abbreviation for Mergers and acquisitions is used to describe the consolidation of two firms through financial transactions. Mergers are basically when two companies combine to form one big firm in such a way that one company ceases to exist and Acquisitions are when one company acquires a major stake of the other company by purchasing shares or acquiring the assets. There can be multiple reasons why a company opts for either mergers or acquisitions. Few reasons can be: ● Obliterate competition: One of the major reasons for M&A is to eliminate competition. Most of the time a big firm acquires or merges with another firm to stay ahead in the competition. With the help of this, they also achieve a higher market share. ● Diversification of business: When a firm wants to introduce new products or diversify its business it can opt for M&A. By this one can incorporate an established product or company and increase its overall profitability. ● Enhance capabilities of the firm: One of the major benefits is that firm’s capabilities in research and development, economies of scale, and manufacturing system are enhanced. ● Tax Benefits: Many firms opt for M&A to gain tax benefits. If any company operates where tax is high, it can be merged with another company where tax rates are low. Also if any company has huge table profits it can be merged with a company of tax losses which in turn gets balanced. There can be multiple reasons for M&A to occur but the end goal of each reason is the betterment of a firm. Structure of mergers: Mergers can be of various types according to the relationship between the two parties involved. Few types of mergers are stated below: 2 ● Horizontal merger: When the two firms are competitors and have the same product line ● Vertical Merger: In this, a company merges with its customer or a supplier with the company like a tomato seller merges with a ketchup company. ● Congeneric Merger: This occurs when two companies serve in different ways but to the same consumer base. For example: TV manufacturers and Netflix. ● Market extension merger: In this, the two firms sell the same product but in different markets. This takes place to increase reachability. ● Conglomerate ration: It occurs when two firms with no common business merge. Types of M&A: Based on underlying transactions we can categorize mergers and acquisitions. In the case of mergers, two companies combine and shareholders approve the deal. In the case of acquisitions, the acquiring company takes the major stake of the other company but the structure of the firm remains the same whereas in the case of consolidations, a new firm is formed and old structures are abandoned. In asset acquisitions, the assets of a firm are acquired with the permission of its stakeholders, and last but not the least, in management acquisition or Management led buyout controlling stake is taken off a company. Benefits: M&A is an important process that helps firms to increase their value or grow. This is achieved by acquiring valuable assets or intellectual property, new technologies, staff with useful skills and knowledge, increasing their consumer base, and attaining economies of scale. Risk: Even though the objective of M&A is an advancement of any firm but few risks are also associated with it. There can be conflicts in the organization due to different company cultures. There are also chances that assets are less valuable as evaluated initially or the M&A can be a little expensive as thought. After the M&A, there’s a possibility that resources are used for managing mergers and employees are reluctant to join the new organization. Initial Public Offering (IPO): Initial Public Offering is that stage in which a private company plans to be listed on an exchange and goes public by selling its stocks to the general public. In the secondary market, these shares are further sold by investors So 3 it can be said that if a firm is going for an IPO, then the firm is operating in a good space and its valuation would be better and a good target for an M&A event. |
| URI: | http://dspace.dtu.ac.in:8080/jspui/handle/repository/18466 |
| Appears in Collections: | MBA |
Files in This Item:
| File | Description | Size | Format | |
|---|---|---|---|---|
| 2MBA-BA-02_22.pdf | INTRODUCTION In an era where the world is becoming highly competitive, it becomes difficult to sustain. With this increasing competitiveness, the number of businesses in a particular domain or field also keeps on increasing. Every new company aims to provide the best to customers than the existing options available. In a need to have the most power or succeed, most companies opt for Mergers or acquisitions. The term M&A which is a common abbreviation for Mergers and acquisitions is used to describe the consolidation of two firms through financial transactions. Mergers are basically when two companies combine to form one big firm in such a way that one company ceases to exist and Acquisitions are when one company acquires a major stake of the other company by purchasing shares or acquiring the assets. There can be multiple reasons why a company opts for either mergers or acquisitions. Few reasons can be: ● Obliterate competition: One of the major reasons for M&A is to eliminate competition. Most of the time a big firm acquires or merges with another firm to stay ahead in the competition. With the help of this, they also achieve a higher market share. ● Diversification of business: When a firm wants to introduce new products or diversify its business it can opt for M&A. By this one can incorporate an established product or company and increase its overall profitability. ● Enhance capabilities of the firm: One of the major benefits is that firm’s capabilities in research and development, economies of scale, and manufacturing system are enhanced. ● Tax Benefits: Many firms opt for M&A to gain tax benefits. If any company operates where tax is high, it can be merged with another company where tax rates are low. Also if any company has huge table profits it can be merged with a company of tax losses which in turn gets balanced. There can be multiple reasons for M&A to occur but the end goal of each reason is the betterment of a firm. Structure of mergers: Mergers can be of various types according to the relationship between the two parties involved. Few types of mergers are stated below: 2 ● Horizontal merger: When the two firms are competitors and have the same product line ● Vertical Merger: In this, a company merges with its customer or a supplier with the company like a tomato seller merges with a ketchup company. ● Congeneric Merger: This occurs when two companies serve in different ways but to the same consumer base. For example: TV manufacturers and Netflix. ● Market extension merger: In this, the two firms sell the same product but in different markets. This takes place to increase reachability. ● Conglomerate ration: It occurs when two firms with no common business merge. Types of M&A: Based on underlying transactions we can categorize mergers and acquisitions. In the case of mergers, two companies combine and shareholders approve the deal. In the case of acquisitions, the acquiring company takes the major stake of the other company but the structure of the firm remains the same whereas in the case of consolidations, a new firm is formed and old structures are abandoned. In asset acquisitions, the assets of a firm are acquired with the permission of its stakeholders, and last but not the least, in management acquisition or Management led buyout controlling stake is taken off a company. Benefits: M&A is an important process that helps firms to increase their value or grow. This is achieved by acquiring valuable assets or intellectual property, new technologies, staff with useful skills and knowledge, increasing their consumer base, and attaining economies of scale. Risk: Even though the objective of M&A is an advancement of any firm but few risks are also associated with it. There can be conflicts in the organization due to different company cultures. There are also chances that assets are less valuable as evaluated initially or the M&A can be a little expensive as thought. After the M&A, there’s a possibility that resources are used for managing mergers and employees are reluctant to join the new organization. Initial Public Offering (IPO): Initial Public Offering is that stage in which a private company plans to be listed on an exchange and goes public by selling its stocks to the general public. In the secondary market, these shares are further sold by investors So 3 it can be said that if a firm is going for an IPO, then the firm is operating in a good space and its valuation would be better and a good target for an M&A event. | 1.55 MB | Adobe PDF | View/Open |
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