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...
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...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
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