MERGERS & ACQUISITIONS

Mergers & Acquisitions

[Name of the Wrier]

Mergers & Acquisitions

Introduction

The purchase of a company by another (acquisition) or the union of two companies, leading to a larger one (merger) are two most common recurrent ways to win today and create competitiveness dimension. Generally, these types of business operations are caused by identification of a threat or an opportunity in the market. The pressures of sale or merger of companies come from different factors. On one hand, the economic boom and the positive evolution of the stock (when Bag rises, companies are better and thus may increase its capacity debt to acquire other companies), along with low interest rates (Facilitating businesses to play a higher level of debt to meet the trading companies, increasing their ability to pay) have led the liquidity of companies is very high (Collan & Kinnunen, 2011, pp.117-141). Furthermore, the opening of markets and globalization have reinforced the competition that companies face, which have to compete with others in cost, size and technological capacity. Also, the venture capital boom has increased business investment opportunities.

Discussion

When two or more companies decide to pool their assets and form a new company is called merger and when a company buys the shares and / or assets a company enough to have control thereon without performing merging their heritages is called acquisition. The ultimate goal is to create value. Many processes are Mergers and Acquisitions have resulted in the need for entrepreneurs to develop and solidify their activities in a particular industry, trying to stay on in it and consolidate in the market (Wu¨bben, 2007, pp. 129-140). However, other companies try to make profits in the short term and seek to acquire a company with objective of increasing its value and then sell at a higher price. The common factor in both cases is the goodwill and benefits attained by the company acquired.

Types of M & A

There are many different kinds of merger for example merger by the creation of a new company. It consists of the merger of two or more companies for the creation of a new society, to whereby each provides its entire heritage and produces the early dissolution of each one of these. Another type is merger by absorption that takes place when the merger is the absorption of one or more companies by existing one and involves the dissolution of absorbed companies, which disappear after transferring all of its assets to the acquiring company. Besides this a merger that takes place between two companies operating in the same industry is called Horizontal merger and merger of companies producing different goods and services for the same finished good is called Vertical Merger (Williams, 2000, pp. 272-279).

Why Do Mergers and Acquisitions of Companies Fail

According to many theorists mergers and acquisitions are not necessarily successful in all scenarios. There are various reasons for M&A to become unsuccessful for example clash of corporate culture. Corporate culture refers to the way how things are done in an organization for example the leadership ...