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Mergers and Acquisition Paper
In recent years the number and speed of merger activity has been incredible. During this period of intense merger activity financial managers must spend a considerable amount of time either searching for firms to acquire or trying to prevent some other firm from taking over their corporation. When dealing with the concept of mergers and acquisitions, a financial manager must have an understanding of how mergers and acquisitions impact a business, both the "sensible" and "dubious" reasons for mergers, the benefits and cost of mergers, and the costs of mergers on cash and stock transactions. Managers must also examine the financial risks of merging with or acquiring a corporation in another country and how to mitigate these risks.
The Impact of Mergers and Acquisitions
In general terms, mergers and acquisitions are performed in "the hopes of realizing an economic gain." If such a transaction is to be justified, the two companies involved must be worth more together than they are apart. This concept is known as synergies. There are a number of potential advantages of mergers and acquisition, such as achieving economies of scale, combining complementary resources, garnering tax advantages, and eliminating inefficiencies. Some other advantages for growth through acquisitions include obtaining proprietary rights to products or services, increasing market power by purchasing competitors, correcting weaknesses in key business areas, penetrating new geographic regions, or providing managers with new opportunities for career growth and advancement. All of these factors impact a corporation in a huge way. However, financial manager ...