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Impact of Mergers and Acquisitions Assignment

   

Added on  2021-04-16

17 Pages4311 Words58 Views
Running head: METHODS AND IMPACT OF ACQUISITIONS AND MERGERSMethods and Impact of Acquisitions and MergersName of the University:Name of the Student:Authors Note:

METHODS AND IMPACT OF ACQUISITIONS AND MERGERS1Table of Contents1. Introduction......................................................................................................................22. Evaluation for and Against Use of Mergers and Acquisitions........................................23. Evaluation of Use of “Cash Offer” and “Share Exchange”.............................................54. Main Reasons for Failure of Merger and Acquisition in Improving Shareholder Value85. Conclusion.....................................................................................................................11References..........................................................................................................................12

METHODS AND IMPACT OF ACQUISITIONS AND MERGERS21. IntroductionMergers and acquisitions are observed to attain great attention because of great amountsof money associated with it along with public competition for support of shareholders.Moreover, they can also offer faster means of attaining strategic goals (Bauer et al. 2016). On theother hand, this can also lead to drastic failure that demands a better appraisal of the targetorganization. Considering this, the objective of this paper is to analyse the reasons for methodsalong with impacts of mergers and acquisitions. The report will also try to attain a strategicunderstanding of the business valuations and capital structure. Evaluation of the use of cash offerand share exchange as a form of merger and acquisition consideration will be carried out. Alongwith that in discussing the same, it will be anticipated that the bidding organization has nosurplus cash and can consider employing debt finance or rights issue in order to attain cash. 2. Evaluation for and Against Use of Mergers and AcquisitionsMergers and acquisitions can be understood as mutual resolution of two companies inorder to turn out to be one entity and it might be observed as a choice generated by two equals(Boyson, Gantchev and Shivdasani 2017). The mutual business by means of structural andoperational advantages attained by the merger will decrease cost along with increasing theprofits. This can facilitate in increasing shareholders value for all the shareholder groups. Themajor intention of a company is to increase the wealth of its shareholders over and more thanthat of the two company’s wealth. Considering the same, the best instance of merger is AOL andTime Warner merger in the year 2000 and this turned out to be one of the biggest deals thatfailed later (Malmendier, Opp and Saidi 2016). The advantages and disadvantages associatedwith merger and acquisition is relied on the new organizations long term and short term

METHODS AND IMPACT OF ACQUISITIONS AND MERGERS3strategies and initiatives. This is due to the reason that the factors prefer differences in businessculture, market environment, acquirement expenses along with changes within financial powerassociated with the captured business (Cartwright and Cooper 2014). Certain advantages anddisadvantages associated with the use of merger and acquisition by organizations are explainedthrough taking cases of real life organizations. Certain advantages associated with followingmerger are explained under:The major reason for the companies to enter within merger and acquisition is to mergetheir control and power over the marketsEconomies of scale are carried out through resources and services sharing. This isbecause of the reason that union of both the companies’ leads to total cost reductionalong with offering increased competitive advantages which is feasible because of highbuying power and longer production runs (Osarenkhoe and Hyder 2015). For instance,one successful business merger is observed in case of Dell and EMC that merged into asingle organization and succeeded in the international technology industry. In order to become competitive, organizations are to be compelled to remain at the top ofall technological advancements along with their dealing applications (Chui and Ip 2017).Through merger and acquisitions of a small organization with exceptional technologies, ahuge organization is deemed to attain or develop a competitive advantage.One of the major advantages of merger and acquisition that can be attained by theorganizations is tax advantages. Financial benefits can encourage mergers and companieswill totally consider use of tax-shields, improvement in monetary leverage along with useof alternative tax advantages (Reddy 2015).

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