Introduction Mergers and acquisitions immediately impact organizations with changes in ownership, in ideology, and eventually, in practice. There are multiple reasons, motives, economic forces and institutional factors that can, taken together or in isolation, influence corporate decisions to engage in mergers or acquisitions. The financial risks of merging with or acquiring an organization in another country and how those risks can be mitigated are important issues for corporations to conduct research on. This paper will examine the sensible and dubious reasons for mergers and acquisitions and the benefits and costs of the cash and stock transactions. Mergers and Acquisitions According to Florida Incorporation, a merger is the statutory combination of two or more corporations in which one of the corporations survives and the other corporations cease to exist. An acquisition is obtaining control of another corporation by purchasing all or a majority of its outstanding shares, or by purchasing its assets (Florida Incorporation, 2006). According to Gilles McDougall, the reasons for mergers and acquisitions are numerous and include: · To diversify or expand markets; · To acquire particular production technologies; · To take advantage of work forces with particular skills; or · To benefit from "good opportunities" to take over a corporation. Over the last few years, the pressures emanating from international competition, financial innovation, economic growth and expansion, heightened political and economic integration, and technological change have all contributed to the increased pace of mergers and acquisitions. Cash and Stock Transactions There are several options available for companies looking to acquire a foreign co... ... middle of paper ... ...n July 9th, 2006 from http://www.florida-incorporation.com/glossary.html Investopedia. (2006). Foreign Exchange Risk. Retrieved on July 9th, 2006 from http://www.investopedia.com/terms/f/foreignexchangerisk.asp Investopedia. (2006). Translation Exposure. Retrieved on July 9th, 2006 from http://www.investopedia.com/terms/t/translationexposure.asp Investopedia. (2006). Economic Exposure. Retrieved on July 9th, 2006 from http://www.investopedia.com/terms/e/economicexposure.asp McDougall, Gilles. (1995). The Economic Impact of Mergers and Acquisitions on Corporations. Retrieved on July 9th, 2006 from http://strategis.ic.gc.ca/epic/internet/ineas-aes.nsf/vwapj/wp04e.pdf/$FILE/wp04e.pdf Week 5 Lecture. (2006). FIN 325 Mergers, Acquisitions, and International Finance. Retrieved from rEsource on July 7th, 2006 from https://ecampus.phoenix.edu/secure/resource/resource.asp
fail (Cheng, 2012). Mergers and acquisitions are much common in these days and only a few of them are end up in successes. Even though mergers and acquisitions are not result much successes rate, many organizations are still preferring it because, it is used as a cooperative strategy but nowadays it is used for cooperative development. The cultural differences and merger integration can be considered as an important factor for the failure rate but this study mainly focused
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.
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
Jharkharia, S. (2012). Supply chain issues in mergers and acquisitions: A case from Indian aviation industry. International Journal of Aviation Management,1(4), 293-303.
Chang, S. Suk, D. Failed takeovers, methods of payment, and bidder returns, Financial Review. 33 (2), May 1998.
As the business, people put it, to maximize the wealth of shareholders (Peavler, 2016). This could be done by pursuing more of an immediate reason that will realize the shareholders wealth maximization goal. However, this main reason may fail to be realized as most mergers depict negative results.
SUDARSANAM, S. (1995) The essence of mergers and acquisitions. Hemel Hempstead: Prentice Hall International, p.1.
Berk, J., & DeMarzo, P. (2011). Corporate finance: The core, second edition. (2nd ed.). Boston, MA: Prentice Hall.
When two companies decide to combine forces and become one bigger, richer mega company, it is called merging. This process forms a new company, combining the money and ideas of what used to be two different entities into one. This, however, is not the only thing that results from merging two different companies, and since we will be discussing the merging of two companies in the pharmaceutical industry, the impact will be incredible. Of course, the merging of two companies will not only have positive impacts but it will have many negative side effects as well. Furthermore, depending on the size of the merging companies and the goals of the people leading these companies there will always be contradictions according to the long-term goals or short-term goals depending on what both parties’ interests are. Our company, Verduga Inc. is contemplating to merge with Coronado-Salinas Inc., so before we rush into such a merger we must contemplate the positive and negative aspects of such a move. When it comes to mergers there are always many possible positive and negative impacts due to the effects of merging; these effects more widely impact the fields on research and development, on employment and management, stocks and shareholders, monopolization, and ingenuity.
Loos, N. (2006). Value creation in leveraged buyouts: Analysis of factors driving private equity investment performance. Wiesbaden: Deutscher Universitäts Verlag.
...titive effects. Third, the Agency assesses whether entry would be timely, likely and sufficient either to deter or to counteract the competitive effects of concern. Fourth, the Agency assesses any efficiency gains that reasonably cannot be achieved by the parties through other means. Finally the Agency assesses whether, but for the merger, either party to the transaction would be likely to fail, causing its assets to exit the market. The process of assessing market concentration, potential adverse competitive effects, entry, efficiency and failure is a tool that allows the Agency to answer the ultimate inquiry in merger analysis: whether the merger is likely to create or enhance market power or to facilitate its exercise.
Chaurasiya, K. and Profile, V. 2010. Advantages and disadvantages of acquisition | business management strategy. [online] Available at: http://businessofaccouting.blogspot.co.uk/2010/04/advantages-and-disadvantages-of.html [Accessed: 8 Mar 2014].
The first two do not require the acquired business unit to be connected with the existing units; the second two depend on connection. Although the concepts are not always mutually exclusive, the way in which they generate value for the corporation is different for each. The portfolio management balances current business activities with new industry acquisitions. Its success is undervalued acquisition meets attractiveness and COE test. The challenges are: increased capital market competition, need for industry specific knowledge, and growth of the company and diversity. The restructuring seeks underdeveloped or sick companies and industries. Its successes are: utilize and pass the three tests and ability to find undervalued companies with growth potential. Its challenges are: restructurer exposed to more risk, time limit for success, hold onto a restructured company, and growing depletion of restructuring pool with increased competition. The transfer of skills involves activities important to competitive advantage. With transferring skills, business activities are similar enough that sharing knowledge would be meaningful. However, skills must be useful to key business activities and must be beyond competitors’ capabilities. The ability to share activities has been a potent basis for corporate strategy because sharing often enhances
A merger is a contract to bond two prevailing companies in to one company. There are several types of mergers and also several motives why companies complete mergers. Most mergers hitch two existing companies in to one newly named company. Mergers and acquisitions are commonly done to swell a company reach, expand into new segments or gain market share. All of these are done to please shareholders and create value. In a merger the BOD of the two companies approve the grouping and seek shareholders’ approval, after merger the acquired company ends to exist and becomes part of the acquiring company.
Stallworthy, E. A. and Kharbanda, O. P. (1988). TAKEOVERS, ACQUISITIONS AND MERGERS. London: Kogan Page Limited.