Companies Achieve Growth By The Means Of Acquisition Of Another Firm

In addition, like any other merger between two firms, companies benefit from significant cost synergy during the implementation of an acquisition and/or merger with other company. For example, when two companies combine their strengths to complement each other, they restructure their operations and as a result several offices and sites are closed down which leads to the laying off of employees, consolidating services and software applications. All these changes, result in synergy savings for the new company.

Haspeslagh and Jemison (1987), argue that what determines the success of a acquisition is not the actual purchase itself, but the development of the acquisition strategy the supports. Unfortunately, many executives face the acquisitions as an end, not a means to achieve that end. According to this author, the acquisition is only one strategy business growth. There are others as internal growth, joint venture, partnership, franchise and strategic alliance. All should be evaluated by the company before implementing a business development strategy. A proper analysis of the acquisition goes beyond the study's own candidate company. It must include a contribution from the analysis of potential acquisition for the strategic development, as well as

find little evidence of wealth creation, with shareholders of the target firms gaining at the expense of the bidder firms. A merger is said to create value, if the combined value of the bidder or target firm increases on the announcement of the merger (Houston et al., 2001) (Ghosh & Dutta, 2015) (Campa, 2004). Moreover, the synergistic gains hypothesis of corporate acquisitions underlined by Isa & Yap (2004) states that, a combination of two firms will result in a combined gain that is, more than the sum of the value of the individual firm. These gains may be attributed to the increasing efficiencies and synergies of the companies involved.

Do serial mergers and acquisition constitute a viable growth model for a company? Is it an ethical model? Are there specific risks inherent to such a growth model? What are the advantages?

Synergy is difficult to obtain in any merger or acquisition due to the work involved in achieving it. The reasoning behind synergy is value creation. Organizations coming together to achieve more then they possibly could separately. For synergy to happen it requires co-operation and dedication from all managers on both a corporate and business level. Managers often underestimate the work involved in achieving synergistic benefits from mergers and acquisitions. In dept analysis at the initial stages of a merger/acquisition need to be carried out with extreme attention to detail. This is typically carried out by a due diligence report.

According to Parnell, “The attractiveness of mergers and acquisitions seems intuitively obvious: Two firms join forces and the combined organization possesses all the strengths of the individual firms” (2006).

Even though the fundamental objective for mergers and acquisitions is to create value, there may be factors involved that cause the value to be destroyed. It is believed that the prime component of why acquisitions fail is due to the fact that they paid too much to control it, which in turn leaves them with huge debts. The buyer may find that the premium they paid for the acquired company 's shares (the so-called "winner 's curse") wipes out any gains made from the acquisition (Henry 2002).

Mergers and acquisitions immediately impact organizations with changes in ownership, in ideology, and eventually, in practice. There are multiple reasons, motives, economic forces and institutional factors that can, taken together or in isolation, influence corporate decisions to engage in mergers or acquisitions. The financial risks of merging with or acquiring an organization in another country and how those risks can be mitigated are important issues for corporations to conduct research on. This paper will examine the sensible and dubious reasons for mergers and acquisitions and the benefits and costs of the cash and stock transactions.

The idea that the sum of the parts is greater than that of the individual components is the driving assumption behind the synergistic approach to business reorganization. In today’s corporate climate, synergies are at the forefront of acquisitive growth strategies which attempt to supplement internally-generated (organic) growth with targeted acquisitions of existing entities or through business combinations. The goal of these transactions is to achieve a return on investment that exceeds the returns generated by each party prior to the deal. These returns can be measured in terms of cost reductions, increased revenues, and in some instances a

According to Risberg (2013), the efficiency theory argues that mergers are organizational strategies that are implemented to achieve three types of synergies, namely financial synergy, operational synergy and managerial synergy. Generally, the acquirer firm will have considered the target’s capable assets and resources and presume that they can be beneficial to its own development. The synergy concept reinforces this idea when it comes to mergers. For instance, the synergy concept argues that mergers allow the combining of the efficient parts of the companies and the discarding of parts that are considered redundant. Johnson (2014) observes that synergy occurs in varying ways, for instance, when companies combine their different competitive advantages, potential tax benefit, or high manpower. Any factor that raises the market value of the merging firms is called a synergy. This means that the

The nature of change being witnessed in the contemporary business environment has made mergers and acquisitions a common feature. In the context of mergers, some two or more companies engage in negotiations and start to operate as a single entity. On the other hand, in acquisitions, one large firm acquires a smaller company. While on paper, these two components, both mergers, and acquisitions, may appear straightforward; the gist of the issue is that there is significant complexity associated with both measures.

Another type of acquisition is a reverse merger, a deal that enables a private company to get publicly-listed in a relatively short time period. A reverse merger occurs when a private company that has strong prospects and is eager to raise financing buys a publicly-listed shell company, usually one with no business and limited assets. The private company reverse merges into the public company, and together they become an entirely new public corporation with tradable shares. Regardless of their category or structure, all mergers and acquisitions have one common goal: they are all meant to create synergy that makes the value of the combined companies greater than the sum of the two parts. The success of a merger or acquisition depends on whether this synergy is achieved.

This brings me to the importance of acquisitions in Businesses. Acquisitions done at the right time can turn around the fortunes of any enterprise. For Example, Founded in 1911, the rapidly growing Swedish pharmaceutical company Pharmacia, showcased its first demonstration of market power with the purchase American rivals Upjohn in 1995 and Monsanto less than five years later. During that time Monsanto, had been developing the anti-inflammatory drug known as “Celecoxib”, which had been eyed by Pfizer during its development stages. Beaten to the punch by Pharmacia, the American Pfizer announced the purchasing deal of Pharmacia as a whole in July 2002 with the transaction tag of $60bn (U.S). Less than seven years later Pfizer would agree to purchase rival Wyeth for approximately $68bn (U.S). Today, Pfizer Inc. is worth as much as twice its value at $172bn (U.S). Taking another example, at one point Bank One Corp was the sixth largest bank in U.S.It was the first of many dominions that would be purchased by the millennials new born that is J.P Morgan Chase. After a string of successful mergers on its own, including its own consolidation of Chicago Corp and the National Bank of Detroit, Bank One’s buying

The research proposal which is going to be written will mainly revolve around the concept of mergers and acquisition in current situation. Research would mainly focus upon: How mergers and acquisitions take place? Why there is need to merge or acquire? What are the legal ways or step to do that? What parties are involved in mergers and acquisitions? What are the Factors to be considered before mergers and acquisition? In order to carry out whole research till the conclusion few models will be used such as business evaluation models which will comprise asset evaluation method, historical earning evaluation, future maintainable earnings evaluation, relative valuation and future discounted cash flows (DCF). The purpose of choosing the topic “mergers & acquisitions” is its significance in the industry of modern world now days. (Hansell, 2005)

acquisition, management might not act in the best interest of the shareholders and oppose the