FINANCIAL MANAGEMENT

Financial Resource Management



Financial Resource Management

Motives for the Takeovers

A merger is defined as two firms whom are usually the same size that agree to join as one company that is operated and owned as one (investopedia.com). It is a combination of two companies to create a new company. All of the assets and liabilities of the companies are shared by the one company that is formed.

An acquisition is slightly different. An acquisition is when one company clearly takes over a second company through purchasing it. There is no joint ownership rather one company controls the other without forming a new company.

The management of a company looking to acquire another company can have many motives. It can seem very desirable to control a larger company because of the gain in efficiency. A company can more efficiently create goods and services saving money and man power. New management and a new team can also be refreshing for a company and create a new start, which many companies need in order to get out of a hard situation they might find themselves in.

It seems that mergers or acquisitions have very positive outcomes, but we see that this might not be the case. Mergers can cause tension between the two management teams and employees of the two companies. It could also be hard to line up both companies objectives in order for them to be one successful company. These struggles can be hinted at with the fact that it is not an ongoing trend for companies to merge.

Mergers and acquisitions have helped many companies, where many pros and cons are documented. Some employees gain power and some get laid off. The government has been trying to limit the negative effects that mergers and acquisitions can have on the people involved. With the continuation of mergers and acquisitions both the American and global market can work more efficiently and effectively (Kapferer, 1997; Yip, 1992). A lot of companies relate acquisitions to be important strategies to expand internationally, to gain market share, and enter into relatively newer markets quickly with reducing research and development costs (Walker and Price, 2000).

The largest food manufacturer in the U.S. Kraft Foods made a formal offer to acquire the assets Cadbury Plc. shareholders of the British confectionery company. Kraft is willing to pay for the chocolate maker 9.8 billion pounds ($ 16.3 billion), according to Reuters.

The proposal of the American manufacturer has not changed since the last time Kraft Foods announced its readiness to pay 300 pence in cash and 0.2589 Kraft shares for each security Cadbury. But still guide the British company rejected all bids Kraft Foods, which forced the Americans at the beginning of November this year to go to a hostile takeover Cadbury.

Kraft Foods appealed directly to the shareholders of Cadbury, and still hopes to create the world's largest confectionery group. American company made the first offer to buy rival in early September this year, estimating per share Cadbury in 713 pence a ...