Summarize the advantages and disadvantages of mergers and acquisitions as a means of diversification. Discuss how...

Summarize the advantages and disadvantages of mergers and acquisitions as a means of diversification.

Discuss how the potential benefits of diversification may be adversely affected by conflicts between manager interests and stockholder interests. Hint: Egotism, growth for the sake of growth, antitakeover tactics.

Expert Solution

Advantages of mergers and acquisitions as a means of diversification

Companies aquire other new and weak companies
Companies gain properties, market share, new customers, new supply chain
Competition is wiped off
Product portfolio increases

Disadvantages of mergers and acquisitions as a means of diversification

All the liabilities of acquired company is transferred to the acquiring company
Acquired company might be difficult to turnaround and make profitable
Tension might grow between employees of both firms

Discuss how the potential benefits of diversification may be adversely affected by conflicts between manager interests and stockholder interests

The conflicts between manager interests and stockholder interests might hinder the integration of both companies
This conflict might result in negative synergies due to merger
Instead of taking advantage of merger, companies would be busy solving these conflicts

keosha answered 1 year ago

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