ECONOMICS ASSIGNMENT

Economics Assignment

Economics Assignment

Mergers and Acquisitions

Mergers and acquisitions are the processes that accompany the development of the economy since the establishment of mass production and large enterprises, that is, from the mid-nineteenth century. They are one of the ways the development and growth of the enterprise, an alternative to growth based on internal method implemented on the basis of their own resources and skills or capital investment traditionally understood. These processes taking place in the public and private equity, including in the context of privatization.

Mergers and acquisitions processes are highly successful and popular among today's enterprises. They have a huge impact on the competitiveness and development of not only companies but also sectors and even the entire economy. At the same time are difficult and complex processes, which in many cases fail. The decision to carry out a transaction associated with the entrance to the difficult path of development of the company, which increase the likelihood of shareholder value is relatively low (Danzon, 2007, 307-328).

In many of the comments and statements about M & A transactions indicate the pejorative financial results when they are made. Mergers and acquisitions often accompanied by opinions that are destroying the value of business processes. According to numerous studies, on the effectiveness of mergers and acquisitions, it states that it is far from satisfactory. Depending on the adopted survey methodology, sample and the period in which the survey was conducted, empirical studies give different results.

After analyzing the results of research presented raises the question: Why do so many transactions fail? What is the cause of so many failures? And also, is it possible to identify the factors which bring the company to success?

The effectiveness of mergers and acquisitions is dependent on careful preparation process, the skilful and efficient and thus avoiding the mistakes of his which can be very expensive (Andrade, 2002, 1-36).

Reasons for failure of M & A

The reasons for the failure of the transaction can be sought both in the preparatory stage to the transaction, the negotiation stage and integration stage.

The Preparatory Phase

At the preparatory cause of the failure may be due to an incorrect decision on the choice of method of business development (development of internal versus external growth), the lack of explicit motives, goals and strategic plan transactions arising directly out of the development strategy of the firm and the wrong candidate of choice available. Too idealistic perception of the potential candidate is also associated with a too optimistic assessment of the situation in the market in which the candidate for acquisition. Errors in this area contribute to the overestimation of the benefits of synergies, which may be due on the one hand the lack of reliable information and data on the target company, but also the over-optimism of executives, as to whether the potential benefits (Healy, 2000, 135- 175).

Negotiation Stage

At the stage of negotiation reasons behind the failure usually refer to two basic questions: the valuation of the acquired business and choice method pay and sources of ...