Question

1. Explain how successful mergers and acquisitions can contribute to the better management of overall risk exposure for the companies involved.  

Answer 1

Successful mergers and acquisitions can contribute to better management of overall risk exposure because-

A.Successful mergers and acquisitions are leading to diversification which will be eliminating the risk associated with operating within singular industry

B. successful mergers and acquisitions are also leading to increase in the market share and it will provide the company with more of the earning and profit which would eliminate the risk to large extent

C. If the multinational company has entered into mergers and acquisitions with other companies with other countries, then it can also help in hedging with the transaction risk and other risk in relation to the exchange rate fluctuations

D. Mergers and acquisitions are also helping in cutting down all such additional wastage caused by allocation of the resources in the most efficient manner

E. mergers and acquisitions are also leading into Synergy benefits and intellectual property sharing which is leading to maximisation of the rate of return and elimination of the risk.