Mergers and Acquisitions

1191 WordsOct 15, 20065 Pages
Introduction 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. Mergers and Acquisitions According to Florida Incorporation, a merger is the…show more content…
Foreign Business Risks Conducting business internationally can be a risky investment. Political risks, exchange rate risks, transaction risks, translation risks, and economic exposure are tendencies that international businesses have to deal with. Foreign business risks can leave a company in ruins if the business does not research and protect itself. Political risk is the possibility of negative events such as expropriation of assets, changes in tax policy, expropriation for minimal compensation below market value, restrictions on the exchange of foreign currency, governmental controls in the foreign country, local governments requiring equity positions, or other changes in the business climate of a country. International business can lead to these types of political risks and studying the market can help to lessen the damage that can be done. The exchange rate risk is the risk of an investment's value changing due to changes in currency exchange rates. For example, if money must be converted to another currency to make a certain investment, then any changes in the currency exchange rate will cause that investment's value to either decrease or increase when the investment is sold and converted back into the original currency (Investopedia, 2006). According to Eric Brown, there are three measures of exchange rate risk: 1. Translation exposure 2. Transactions exposure 3. Economic

More about Mergers and Acquisitions

Open Document