Financial Management-Unit4IP-Corporate Acquisitions

Financial Management-Unit4IP-Corporate Acquisitions

Fundamentals of Corporate Acquisitions

In the wake of new phenomenon in the markets which calls for greater level of efficiency in the course of operations and serving value added products and services to the customers, mergers & acquisitions have played a vital role to serve the purpose. Corporate Acquisitions have been going on for a very long time. There is range of motives behind corporate acquisitions. Such acquisitions may allow the company to achieve economies of scales which will reduce the overall cost and bring about a diversification in its product and service offerings. Corporate acquisitions have also been done to add up the market shares of two different companies thus giving a unique competitive edge or possibly becoming market leader. It may also be a good investment choice for further growth. No matter what is the apparent reason may be stated, the ultimate reason for the corporate acquisitions (and even mergers) have always been increase in shareholders wealth which also act as a decisive criteria for the success and failure of any acquisition.

Motives of Acquisitions

Corporate Acquisitions are targeted to attain a competitive edge. There are several reasons that contribute to the M & As of the firms like, market share improvement, new markets entry, new product development with research and design etc. The main benefit of mergers and acquisitions is that the acquiring firm considers the merger or takeover as a profitable investment. Handy (1993) suggests that the addition in the shareholder's value remains the main motive behind a merger and acquisition (pp. 56). However, there are broad interpretations as well as justifications highlighted in literature, and it also highlights the advantages of any merger and acquisition activity which leads to increment in value for shareholders (Abellan, 2004, 78), the study in the literature further lays ...