Advantages And Disadvantages: Benefits Of A Mergers And Acquisition

Merging with another organization has downfalls of destroying wealth from the merger. Considering the buying price is important when merging, spending too much on the merger will impound the value after the merger. Some mergers do not create wealth so capital is lost through the merger. There is no guarantee of financial gain and every formula considered with focus, just as with an acquisition. The final decision dictated by the variables. One company merging with another company takes the debt and losses of those companies in the new formed company.

(a) In a merger agreement, the assets and liabilities of the firm which is being acquired end up being absorbed by the buyers firm. A merger could be the most effective and efficient way to enter a new market without the need of creating

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According to the researchers the increased value results from an opportunity to utilize a specialized resources which arises solely as a result of the merger (Jensens & Ruback, 1983; Bradle, Desai and Kim , 1983). For creating operational and financial synergies managers believe that two enterprises will be worth more if merged than if operates as two separate entities. Thus, the two companies, A and B:

Haspeslagh and Jemison (1987), argue that what determines the success of a acquisition is not the actual purchase itself, but the development of the acquisition strategy the supports. Unfortunately, many executives face the acquisitions as an end, not a means to achieve that end. According to this author, the acquisition is only one strategy business growth. There are others as internal growth, joint venture, partnership, franchise and strategic alliance. All should be evaluated by the company before implementing a business development strategy. A proper analysis of the acquisition goes beyond the study's own candidate company. It must include a contribution from the analysis of potential acquisition for the strategic development, as well as

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When companies combine/merge the whole objective is to gain new opportunities, gain market share, grow the business, to become more innovative and to improve product offerings, utilizing/sharing the existing resources and data. From the case

Acquisitions are popular in the United States and there are many reasons why a company decides to acquire another company. Companies will decide to acquire a business in order to increase market power. Market power happens when a company sells its good or services above competitive levels. If a company attains a high market power, it can become a leader (Hitt, Ireland, & Hoskisson, 2015).

Mergers and acquisitions (M&A) strategies have been popular among U.S. firms for many years (Hitt, Ireland, & Hoskisson, 2013, p.195). Firms use merger and acquisition strategies to improve on their ability to create more value for all their stakeholders, including shareholders’ (Hitt et al., 2013, p.195). A merger is a strategy through two firms that agree to integrate both of their operations. Although, most mergers that are completed are friendly in nature, acquisitions can be friendly or unfriendly (Hitt et al., 2013, p.196). An acquisition is a strategy through which a firm buys a controlling, 100 percent, or interest in another firm with intent of making the acquired subsidiary business part of their portfolio (Hitt, Ireland, & Hoskisson, 2013, p.196).

Mergers can help with entering emerging markets, cutting costs, and gaining competitive advantages. There is increased pressure for publicly traded companies to raise their earnings. If it cannot be done inside the company, they might seek to acquire companies to boost earnings. Additionally, the internet and technology advancements have brought about off-shoring of white collar jobs and made merging with competitors easier.

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In recent times, merger and acquisition are considered as one of the important steps for strategic growth. A company can plan to merge or acquire another company if it thinks it is a good investment, or they will earn a sound investment from it. The primary goal of any company entering into merger or acquisition is to boost the shareholder wealth. From a financial perspective, merger is carried due to diversification. It is the process of reducing the risks through investment decisions. For example, many a times, a company is highly at risk since it has done enormous investment in one industry then it can intend to buy a business in another industry (Sky Plc, 1990). This is termed as acquisition and can be beneficial for the host country.

In our days mergers and acquisitions are a predominant feature of the international business system as companies attempt to exploit new market opportunities and to strengthen their market positions. Each year sets a new record for the total value of mergers and acquisitions and nearly every day new announcements are made in the business newspapers.

Firstly, the activity related to a merger with an operating business should be less-time consuming, especially in a global environment. Merger activity can be pressed through in a stage of weeks or months unlike the slow activity of internal/organic growth, which need exhaustive planning,

By combining the market share, it represents a threat to the new entry. As the merged company has the reputation of quality control and security of supply, it is more reluctant for the new entry to switch and also be difficult to meet its initial stages of operation to generate profit.