MERGER AND ACQUISITION

Merger and Acquisition

Merger and Acquisition

Introduction

It is in human nature to be driven by greed and he is always in hot pursuit of power. It is man who runs these businesses, corporate and corporations and they are looking to expand and to grow ever bigger with every passing day. While trying to grow those who have the resources available end up taking over the other organization. That organization may be in the same industry and the reason could be to do away with the competition or to grow bigger. Besides that, manger merge to diversify and to enhance their portfolios. They manage to do so via mergers and acquisitions.

There may be mergers, which occur with the mutual consent and the companies co-exist as on and the names may be merged or a new name may be derived, (Boeing and McDonnell-Douglas, Daily Dawn, 2002). On the other hand when you try to take over the other firm without any prior consent it is known as an acquisition and the acquisition may be hostile in nature or again may be done with mutual consensus.

Initially there was not a trend of mergers but the idea has caught up because due to globalization the competition has increased and since the trade world is constantly growing you need to be bigger to compete with everyone else who is in the running with you. Companies contemplating mergers or acquisitions have an opportunity to protect themselves against the pitfalls of successor liability.

There are certain factors in the economy and elsewhere, which have an impact on the overall activity of how many mergers and acquisitions are talking place during a given period. Basic influence is the government policy and the opening up of world economies, which dictate these terms to the companies. Firms merge either when they are in distress or are vulnerable or want to expand to acquire the growing market. That is why we saw a lot of mergers after the world wars and acquisitions during the Great Depression.

Similarly with the WTO regulations about to set in soon and government requirements for firms to be of adequate size to ensure suitable return for shareholders there is a huge tendency these days for mergers. So basically it is the environment and need for survival which dictates to firms whether they want to merge or not (Mohana Rao, 2000, p203).

A number of factors must be considered in assessing liability arising out of the merger or acquisition. This information can only be obtained by gleaning the facts surrounding the entire acquisition and the subsequent conduct of the parties in terms of the purchase/sale agreement. This is what was formerly known as the buy and sell agreement. The structure of each company's insurance policies will also determine who is going to be responsible particularly when it comes to the deep pocket syndrome.

A successor liability claim may manifest itself in many different ways. It is critical that companies develop a well-rounded plan for managing liabilities associated with mergers and acquisitions ...