Question

1) Discuss why a firm would consider merging and/or acquiring another.

2) Share a real-world example of a merger, acquisition, strategic relationship, and/or restructuring that YOU have experienced firsthand, either that or an example that you find particularly interesting.What are/were your key takeaways?

Answer 1

1)

Merger is nothing but the action by which two or more companies forms a new company voluntarily. Acquisition is nothing but the action by which the corporation buys most or all of the ownership stakes of the target company and control the activities of the target company. Merger or Acquisition is the business decision that is taken in order to expand the corporation by taking over the operations of the existing firm rather than expanding its own operations.

A firm would consider merger and/or acquisition because: -

• Merger or acquisition makes the corporation take advantage of distribution channels of the target company and make the product and services available to the customers effectively.
• Merger or acquisition makes the corporation take advantage of the technologies and business process and save the cost as it would be expensive to develop the same.
• It makes the corporation to take advantage of talented managers and employees and save time and money as it would be expensive to conduct recruitment and training.
• It provides competitive advantage to the target by combining the talents and resources.
• The stock purchase benefits the stockholders of the target firm based on the buyout price given by the acquiring company.

Thus, it add value to the corporation by eliminating redundancy and thus increase the overall profit. So, a firm decide to merge or acquire another firm based on the above benefits.