Corporate Acquisition
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Many corporate acquisitions results in losses to the acquiring firms' stockholders. Accordingly, why do firms purchase other corporation? Are they simply paying too much for the acquired corporation? A co-workers asks your opinion. Specifically state the reasons for your argument.
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The Pros for Merger are:
1. Create shareholder value
One plus one makes three: this equation is the special alchemy of a merger or acquisition. The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies--at least, that's the reasoning behind M&A.
This rationale is particularly alluring to companies when times are tough. Strong companies will act to buy other companies to create a more competitive, cost-efficient company. The companies will come together hoping to gain a greater market share or achieve greater efficiency. Because of these potential benefits, target companies will often agree to be purchased when they know they cannot survive alone.
2. SYNERGY
Synergy is the major reason for the acquisitions
Synergy is the magic force that allows for enhanced cost efficiencies of the new business. Synergy takes the form of revenue enhancement and cost savings.
BENEFITS OF LARGE SIZE
The mergers and takeover will create one of the largest consumer goods Company in the world. It will reap benefits of ...
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