Sony And MGM Merger Acquisition Firms are aggressively engaging in merger and acquisitions as financial strategi es in today?

s business world. Merger and acquisitions are a process discussed be tween two firms each seeking to benefit from the decision of marrying the two co mpanies?. Factors to be considered when combining the firms are their financial benefits and operation efficiency from the transaction. The objective is to redu ce the rate of risk to increase value on the firm, thus bringing a higher return to its shareholders. In addition, combining firms with opposite beneficial phas es in the business cycle will reduce their inconsistent performance. This has be en more evident with international firms. As new countries have joined the global market force, there have been a substant ial number of foreign companies penetrating the US industry. Most of these forei gn firms have infiltrated the market using their influential power in the politi cal and economic arena. Sony Corp. and Metro-Goldwyn-Mayer, (MGM) are two firms which consensually merged in early 2005. Both are considered to be a conglomerat e. They are highly compatible and recognized to have a strong hold in the motion picture industry; however, Sony has other units including electronic, and games . Sony is a foreign firm originated and based out of Tokyo while MGM was based i n the US. Before Sony and MGM considered the acquisition they analyzed the pros and cons of merging, the factors considered in the price to be paid, the anticip ated benefits, the fluctuation of their stock, and the combined capital structur e. Once the acquisition was completed other factors were examined, such as the o verall outcome of the deal, and the international financial management issues, i f any. Pros and Cons of Mergers and AcquisitionsIn order to make a well informed decisi on toward a merger or an acquisition, several factors must be taken into account , and possibilities explored.

The following article gives a brief description as to how the Sony and MGM merge r acquisition took place. There were biddings and counter biddings. There were o ther contenders also but finally Sony came out victorious. The main reason for S ony to acquire was not the synergy cost but acquisition of Blu Ray Disc. Facts about MGM or Metro Goldwyn Mayer Inc: Birthday: Established in the year 1924 on the 16th day of April. Type of company: MGM is a subsidiary of Comcast, Sony as well as their equity pa rtners. Products offered: Television programs and motion pictures. Type of industry: Motion pictures Owned by: Sony having 20% stake. TPG Capital with 20% stake Providence Equity Partners with 29% stake. Comcast-20% Quandrangle Group-3% DLJ Merchant banking Partners with 7% stake. Sony and MGM merger acquisition took place on 8th April, 2005. The acquisition w

as carried out not by Sony alone. It was a joint acquisition of Comcast, Sony Co rporation of America in tie up with Texas Pacific Group. Texas Pacific Group is now referred to as TPG Capital. Providence Equity Partners was also another part ner in the acquisition. Currently, Sony is responsible for distributing co productions of Columbia Trist ar and MGM/UA. However, MGM is putting in all efforts to acquire rights pertaini ng to worldwide films. Twentieth Century Fox has taken up the responsibility of theatrical distribution internationally. It has also taken up the work of distri buting home video pertaining to MGM titles worldwide. This however excludes thos e videos for, which Sony is a major partner. The process of Sony and MGM merger acquisition: In the year 2004, several of MGM's professional rivals started bidding for the c ompany. Time Warner was also on the list of bidders. Ted Turner was the largest stakeholder in the company. Turner Entertainment belonging to Ted Turner had don e very well since it started owning Pre 1986 MGM Library. However, Time Warner f ailed to strike the deal. Sony was the biggest bidder: Sony Corporation of America was found to be the biggest bidder. Sony was support ed by Venture Capital Bankers TPG Capital, L.P as well as Comcast. Providence Eq uity Partners also tagged along. Synergy cost was not primary for Sony. The main concern of Sony was to support Blu Ray Disc at MGM. A counter bid was made by T ed Turner. On 13th September, 2004, Sony enhanced its bid of USD$4.7 billion or USD$11.25 per share to USD$5 billion or USD$12 per share. This marked the withdr awal of the USD$11 per share or USD$4.5 billion announced by Time Warner. Finall y, Sony and MGM merger acquisition was brought about at a purchase price of USD5 billion. Of the USD5 billion, USD$2 billion was used by MGM to clear off debts.