Should Businesses Use Aggressive Forms of External Growth or Hostile Mergers?

According to the researchers the increased value results from an opportunity to utilize a specialized resources which arises solely as a result of the merger (Jensens & Ruback, 1983; Bradle, Desai and Kim , 1983). For creating operational and financial synergies managers believe that two enterprises will be worth more if merged than if operates as two separate entities. Thus, the two companies, A and B:

Mergers and takeovers are forms of external growth within a business. External growth occurs when one firm decides to expand by joining together with another. A takeover specifically refers to the gaining control of a firm by acquiring a controlling interest in its shares (51%). Merger, on the other hand, means the joining with another firm to form a new combined enterprise, shares in each firm are exchanged for shares in the other.

Growing through integration is concerned with mergers and takeovers of businesses. There are a number of different ways of integrating: Horizontal (same industry, same stage of production), backward vertical (same industry towards a supplier), forward vertical (same industry towards the customer) and Conglomerate (different industries).

Companies do not have the freedom to merge and acquire as they please do. All have to meet the requirements and essentially be approved by regulatory bodies. In the context of regulations, antitrust laws and security laws are commonly referred to by regulator to determine whether a merger or acquisition should be allowed or rejected. Antitrust laws prohibit mergers and acquisitions that impede competition. The point is very simple where antitrust is referred to as competition. The goal is to increase competition because more competition in economics means that consumers get more at a fairer or lower price. Anytime a regulator believes that a merger or acquisition will make an industry or market less competitive, the business transaction might

According to Wheelen and Hunger an acquisition is a growth strategy that occurs when a company absorbs another (usually smaller) company as an operating subsidiary or division of the acquiring corporation. Acquisitions usually take place with companies of different sizes and they can be hostile or friendly. Acquisitions can also be a good way to grow

Each of the approaches for expansion – IPO, Acquisition, or Merger – also has weaknesses. An IPO can be expensive and may require 15-25% of the money raised to cover the costs of raising capital in this way. An IPO also requires a tremendous amount of reporting to meet the requirements of the SEC, both for the initial offering and for the future publicly traded company, which not only requires the time and effort of staff members but may also give valuable information to the company’s competitors. All this reporting then creates legal liability for errors and omissions in the prospectus, which adds a further layer of complication. In the end, the former owners lose some control over the business and must share future wealth with the new shareholders. Mergers

Mergers and acquisitions occur because directors see benefits that could come from combining two or more businesses, which could improve the

One key financial driver would be to gain new capital assets. Merging with another company is a faster and often a more inexpensive way to gain capital assets without building new facilities and hiring inexperienced staff. Merging allows you to gain

The principal benefits from consolidation include increase value generation and higher cost efficiencies. Most mergers can generate tax gains, increase revenue, reduce uncertainty, and substantially lower the cost of capital. The 2012 proposed BAE System and European Aeronautics Defence and Space (now Airbus) merger, for example, was largely motivated by a desire to share economic and financial risks, while increasing profits, reducing costs through the realisation of economies of

Mergers can help with entering emerging markets, cutting costs, and gaining competitive advantages. There is increased pressure for publicly traded companies to raise their earnings. If it cannot be done inside the company, they might seek to acquire companies to boost earnings. Additionally, the internet and technology advancements have brought about off-shoring of white collar jobs and made merging with competitors easier.

Mergers have become a main aspect within the market economies, resulting in consequences that are potentially conflicting due to the stiff competition among different businesses (Richard & Yekini, 2014, p. 54). The conventional economic theory suggests that mergers are likely to raise the level of monopoly, hence leading to reduced competition and lower economic efficiency. The truth is that they can boost the effective level of competition within the monopolistic environment where size is an important factor. This means that in the case of markets that have a small number of large producers that are involved in competition, mergers can play a vital role in increasing the economic and financial power of smaller firms. This enables the small firms to compete favourably with the larger ones. Therefore, mergers are able to produce a countervailing force to fight the leading firms, putting more pressure on them, and making them look for other ways to constantly make improvements in their efficiency. This is similar to the way many small businesses behave as a result of competition in highly competitive markets. This paper elaborates the reasons that motivate firms to take over or merge with other firms and the effects of this, both to the employees and the firms involved (Su & Wells, 2014, p.46). This will be established by examination of specific recent acquisition or merger cases within EU member countries, putting into consideration a number of these aspects. The major driver

In business practices existing two main ways in which company may grow organic (by increasing turnover of existing business) and inorganic (by the acquisition of another business). When a corporation tries to expand in the organic way it might concentrate on developing it client base, reinvesting benefits in new assets with higher income, and enhance profitability to build it revenue. Business can expand through inorganic growth by converging with another company or purchasing

Internal expansion refers to the growth within the organization by using internal resources. It focus on developing new products, increasing efficiency, hiring the right people, better marketing etc. Internal expansion includes improving of the service, product line, and price.

1. Two major ways in which a company can grow are organically and inorganically (Davis, n.d.). Organic growth is growth that is achieved within an existing business, by increasing sales and number of clients to increase profitability. Organic growth can be achieved many ways. The easiest way is if a firm’s product is in high demand

When the entities generating and absorbing the externalities are firms, merger is a very attractive way of internalizing externalities. After the merger it is in the best interest of the new consolidated firm to consider the effects of its activities (on the previously separate, affected entity) in its decision making process.