Corporate Finance, Student Value Edition (4th Edition)
Corporate Finance, Student Value Edition (4th Edition)
4th Edition
ISBN: 9780134101446
Author: Berk, Jonathan; DeMarzo, Peter
Publisher: PEARSON
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Chapter 28, Problem 5P
Summary Introduction

To explain the differences in the structuring of the deal and post merger integration, when an acquisition is motivated by the skills and expertise, the target company has than when acquiring a company which has attractive physical assets.

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If you are planning an acquisition that is motivated by trying to acquire expertise, you are basically seeking to gain intellectual capital. What concerns would you have in structuring the deal and the post-merger integration that would be different from the concerns you would have when buying physical capital?
Suppose you are the CEO of a large firm in a service business and you think that by acquiring a certain competing firm, you can generate growth and profits at a greater rate for the combined firm. Youhave asked some financial analysts to study the proposed acquisition/merger. Do you think valuechain analysis would be useful to them? Why or why not?
Discuss the validity of risk diversification as a motivation for companies engaging in merger and acquisition activity?
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