Business Combinations Essay

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2.1 Introduction of Business Combinations
In this sub-chapter, the main aim is to give a general idea about the business combinations through identify the motivations by applying the business combinations to conclude the transactions or events between the acquirer and acquiree in a business. Namely, defining the business combinations. Moreover, the different types of the methods to conclude a business combination.
2.1.1 Motives for Business Combinations
Nowadays, with the consecutive development of the economic globalization and the trend of growing competition on the world stage, business combinations are becoming more popular and frequently used methods for the development of the companies in the 21st century. In terms of accounting, Mergers …show more content…

In other words, some enterprises seek the chances to improve the financial performance of the business, make the company growth by owning new markets or increasing the market shares of the company, or through the reduction of the operating costs, to have some benefits in tax aspects and management incentives. The following aspects are the key factors, when considering the improvement for the financial performance and they are also known as the dominant rationale to form the business combinations:
• Synergy: Synergy means two or more companies functioning together and produces a result greater than the each company produced individually or even achieves a result that cannot be obtained by a separate company alone. If this term applies in a form of business, synergy means teamwork produce a better result than if the work doing it separately in a group. The effects of the synergy for a company can be remarkable, such as help earning higher revenues or lowering the expense or the overall cost of …show more content…

Therefore, from this point of view, a profitable enterprise can combine with a loss maker and use this chance as a way to reduce the tax liabilities for a combined enterprise.
2.1.2 Definition of Business Combinations
Business combinations are mainly an activity or transaction where an acquirer obtains control of either one or more than one business. Generally, the business combinations refer to the transactions in which companies gain the control or the shares of the control in another company. In other words, events or transactions in two or more business enterprises or their net assets are combined under control of the single business entity. A business combination can be easily managed through the acquisitions, mergers and so on.

Mergers: mergers usually mean to combine the two companies in to a lager single company, either through creating a totally new company or continuing the operation of the partners “under the roof” of any one of them. The aim of merger is to enhance the financial and operational capacity of the

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