Mergers and Acquisitions

Mergers and Acquisitions

Introduction

Mergers and acquisitions is a class of economic processes of consolidation of business and capital, occurring at the macro and micro levels, resulting in the market there are a larger company instead of multiple minor. The main purpose to purchase a company is to create values for shareholders over and above. Two or more companies together are more valuable than two separate entities. This is the main reason why companies go from merger acquisition or joint venture (Chase, 2007).

Companies adopted these strategies when they are facing a tough time. Strong companies act to purchase other companies so that they can develop competitive and cost efficient company. Hence, expansions for a company with low cost and greater market share. However, companies merge hoping to gain a greater market share or to achieve greater efficiency (Cartwright, 2006). These potential benefits allow companies to be purchases by powerful shot name as they know them cannot survive alone in this competitive environment.

Wal-Mart

Wal-Mart is the largest retailer in the world providing all you need under one roof in literally every sense of the word. It is well recognized both locally and internationally for its EDLP (Every Day Low Pricing) model. It is present in nine countries across the globe. Wal-Mart is in the list of Fortune Global 500 listed number one in the best-performing companies in the world. Wal-Mart officially has a corporate culture that employees designated as equal partners of the company. This is, especially in the U.S., with strong anti- union policies of the associated company. Wal-Mart is currently the world's largest general retailers ahead of its competitor Carrefour stores with 3500 and 20% estimated market share and the largest distributor of toys with 45% estimated market share, having surpassed Toys "R" Us in the late 1990s (Wal-Mart Company Information, 2012).

Merger Decision

The decision considered for this module is to merge Cosco with that of Wal-Mart. Merger is a better option since Cosco is a giant company and acquiring it would not be possible for Wal-Mart. The merger would have certain benefits for Wal-Mart (Black, 2007);

There are no cash requirements for merger

The situation of merger may be accomplished free of cash for both parties involved.

It also enables the shareholders of the small units to hold share price to some extent increasing their overall net worth.

It allows avoidance of several costly and time consuming elements with respect to asset purchases.

Reduces the number of competition and captures additional economies of scale, which helps n increasing the growth of the company.

Gain Market shares.

Availability of surplus money

From the perspective of the acquiring Cosco, the objective of the transaction is to generate wealth by obtaining some valuable strategic benefits under control of the target firm. It will also help Wal-mart reduce its costs of shipping as well as increase efficiency in its operations. At this point, there are various companies being contracted for shipping while with the merger of Cosco, all shipping consignments will be held by the company only. Acquiring firm managers often mention strategic benefits such as ...