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Strategic Alliance between Companies - Term Paper Example

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The paper entitled 'Strategic Alliance between Companies' presents merger and acquisition which is a form of the strategic alliance formed between two or more companies through the process of selling and buying between two companies in the form of acquisition…
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Strategic Alliance between Companies
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Download file to see previous pages There is a slight difference between the mergers and the acquisitions. In cases of an acquisition, the buying company takes over another company and gains control over the entire assets and the liabilities of the company that it has taken over. The acquirer controls the operations and administration of the newly formed entity as a result of the acquisition. However, the target entity or the entity that has been acquired exists as a separate entity whose stakes are controlled by the acquirer (Gregoriou and Renneboog, 2007, p.68). The cases of international merger and acquisition are on the rise. Due to the effects of globalization and reduction of market barriers for foreign investments, organizations are looking to enter into international merger and acquisition in the foreign markets by either sell off or purchase or through the formation of a mixed entity.
the return on investments due to the share of expertise of the two entities in exploring the international market opportunities (Gaughan, 2007, p.35). The rationale for entering into M&A There are valid reasons for which the companies enter into international mergers and acquisitions. The rationale for the companies to enter into international merger and acquisitions are explained as follows. The companies operate in the domestic as well as foreign markets with a profit motive (Angwin, 2007, p.50). The various aspects of the operation, marketing, and sales, allocation of resources, planning and implementation are driven by the profit motives of the companies. Due to the saturation of the local markets and the need for expansion of the business for future growth leads to envisaging spreads of operations of the international markets. The impacts of globalization and the incentives offered for investments by international companies lead to the plan of entering into international mergers and acquisitions (Sudi, 2003, p.36). The major reasons for opting for international mergers and acquisitions are mainly due to the consideration of returns against the possible risks in international mergers and acquisitions. The companies targeting international markets due to the potential demand for their products and services may not be conversant with the market characteristics and the local people. The political conditions of the international markets, fluctuation of economic conditions and the legal intricacies are the possible risk exposure of the companies. For this reason, the entities look for counterparts which have expertise in their probable areas of risk. On the other hand, the company offers its area of expertise in the field of product innovation, technology transfers, customer service, etc. ...Download file to see next pagesRead More
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