Merger and Acquisitions: Description and Characteristics - Case Study Example

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This paper "Merger and Acquisitions: Description and Characteristics" presents the role of mergers and acquisitions in the increase of shareholder value in both the companies that involved can be easier understood if referring to the context of M&A, i.e. to their main characteristics…
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Merger and Acquisitions: Description and Characteristics
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Download file to see previous pages From another point of view, Jackson (2007, 40) ‘acquisitions can be a powerful tool to achieve growth, enter new markets and expand the range of a firms capabilities; but with the highly competitive market for acquisitions and the correspondingly high acquisition prices, all too often transactions fail to create value for shareholders’. Today, mergers and acquisitions have been considered to be the most appropriate strategic scheme for firms around the world in order to enhance their power within their market or increase their value – although these targets are proved often unachievable. The current paper examines a specific issue related to mergers and acquisitions: the value created for the shareholders of the firms that participate in the relevant initiatives. It is proved that in practice mergers and acquisitions should not be considered as a value-creating scheme: they could be characterized rather as business choices imposed by the conditions of the market: in this context, the offeror company can have a significant advantage towards the offeree company which has to follow the specific path (merger or acquisition) when its value has been decreased (or it is under threat) because of the increase of the power of its competitors.

 In accordance with a description given by the business dictionary of Forbes, the term merger is differentiated by the term acquisition at the following points: ‘when one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition; in the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated’ (Investopedia (Forbes), 2008). In other words, the merger requires the firms – participants the mutual respect of the terms of the relevant agreement. In the case of acquisition, the advantage of the transaction is to the buyer’s side who can define the terms and the conditions of the relevant agreement while the seller/ firm acquired should follow these terms without having any particular right to react towards the rules imposed by the buyer/ firm. ...Download file to see next pagesRead More
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