Question

Although mergers & acquisitions are established corporate finance activity, the common knowledge is that a majority of them fail to achieve stated targets and therefore they actually destroy shareholders’ wealth than create it.

Discuss the potential ways in which managers may reduce the failure risk and increase the chances of successful transactions.

Answer 1

Those decisions are best for the company which aims to lncrease shareholders wealth that is to increase earning per share. But due to some reasons many companies fails to do so. Following are the ways to reduce risk and increase chances of successful transactions:-

Plan with suitable control system :- planning is one of the most important part n success of an enterprise. Planning should be strictly designed according to control system. As if plan deviates then one should be having a full blue print what to do next.

Integration processes :- it is usually seen that the integration process in case of mergers and acquisition is weak, that is a critical point of Control for an organisation. As In these cases share earnings would affect a most.

Financial management :- As we know that the finance is the lifeblood of an organisation. Hence, it is to be managed wisely. Any mistake in this regard can be irrecoverable. It can leads to the fixed cost of the firm like fixed interest etc.