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The activity of merger & acquisition is predominantly undertaken by the acquired firms to improve the financial performance. The following factors are considered to improve the financial status of the organisation:
The combined company oftenly reduces its fixed costs by extracting extra departments, lowering the costs of the company and to increase the revenue of the organisation, thus increasing the profit margins.
A profitable company can buy a company who are at loss so as to make use of the targets loss as their merit by decreasing the tax liability. In the United States and other countries, rules are that of profitable companies buys those companies who suffer from loss, which limits the tax motive of acquiring a company.
Geographical diversification is for earning easily from a company, which in the long term helps in the trends of the stock market of a company to rise, giving investors’ confidence while investing in the company.
Vertical integration occurs when the upstream and downstream companies are combined. There are various reasons for vertical integration to occur. One reason is a relationship of internal with an external problem. A common example one of an external problem is that of double margins. Double margins occur when the upstream and downstream companies are the monopolies in power, every company decreases output from the competition to the monopoly level, which results to two losses. By merging the firm can burden one loss by putting the downstream company’s output in the competition. This result to increase in the profit. A merger that introduces a vertically integrated firm can be profitable.
The Saudi Arabian Oil Company (Saudi Aramco), owned by the Saudi Arabian Government, is a collective, global petroleum initiative, and a world leader in discovering and producing, refining, distribution, and etc.
The company operates and reserves of 260 billion bpd oil , the largest than any other company in the world, and is the fourth
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Since the past decade, the globalisation of the businesses across the globe has initiated a search for the competitive advantage, worldwide. With the increased competition to fetch the customer satisfaction in a cost effective way, the companies have responded to the pressure of attaining scale in a quickly consolidating global economy
Founded back in June 1911, IBM is a US-based multinational company that specializes in technology and consulting business affairs. In line with this, IBM Tivoli is known for its advanced technology used in the manufacturing and selling of IT security software and services (IBM 2011a; Kanaracus 2010).
This paper will show the facts of the merger and the particulars in why they occurred also showing the strategies and financial outcomes for each of the corporations involved.
Recently there have been three mergers or acquisitions which are the Time Warner - America Online merger, the KIA - Hyundai merger and the US Airways - America west merger.
Most companies carry it out to improve their business fortunes.
The terms mergers & acquisitions are generally used together or sometimes even interchangeably but there is a sight difference in the two terms. Acquisition takes place when one company becomes the owner of another company in a way that the company sold ceases to exist and the buyer company continues to trade its stock.
In a merger, the surviving firm acquires the assets and liabilities of the other firm(s). A relevant example here is the recent merger of HDFC Bank and Times Bank. After the merger, Times Bank will go out of existence and expanded HDFC Bank will continue to exist.
The current P/E ratio of the shares is 6.6 and the market price per share is 1.03. Since P/E ratio = market price per share/earnings per share (www.12manage.com), if the P/E ratio is to be 8 without affecting the earnings from the share, the value of the
Capita plc has opted for acquisition and not merger because the benefits of an acquisition of a public company are more in the stock market. This helps in increasing the valuation of the concerned company in the long-run. Capital plc has acquired iSoft Business
Companies may also merge in order to overcome forces of competition by increasing economies of scale. Many companies have merged due to diverse reasons depending on their situations and market scenarios. This paper will discuss the merger that took place between the US airways
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