Merger And Acquisition Research Paper

1.6. Benefits of Merger and Acquisition

1) Growth or Diversification: -

Companies that crave rapid advance in size or market share or diversification in the range of their products may find that a merger can be adopted to achieve the objective instead of going through the tome consuming process of internal advance or assortment. The firm may accomplish the same objective in a short period of time by merging with an existing firm. In extension such a strategy is generally less valuable than the alternative of developing the necessary production capability and quantity. If a firm that wants to broaden operations in existing or new product area can find a suitable going concern. It may avert many of danger combined with a design; manufacture

The amount may be accomplished by increasing the sales volume in relation to assets employed increasing profit margins or diminishing operating risks. Although operating synergy usually is the result of either vertical/horizontal integration some synergistic also may conclude from conglomerate progress. In addition, sometimes a firm may acquire another to obtain patents, copyrights, technical proficiency, marketing skills, specific fixes assets, customer relationship or managerial personnel. Operating synergism takes place when these assets, which are intangible, may be combined with the existing assets and organization of the achieving firm to crop an incremental value. Although that value may be difficult to judge it may be the primary motive behind the

Counter Synergism-Certain circumstances may prevent the synergistic effect contemplating from a merger. Often another layer of overhead cost and bureaucracy is joined. Do the advantages outweigh disadvantages? Sometimes the acquiring firm agrees to long-term employments contracts with managers of the obtaining firm. Such often are beneficial but they may be the opposite. Personality or policy conflicts may cultivate that either hamstring operations or acquire buying out such contracts to remove personal position of power. Particularly in conglomerate merger, management of acquiring firm simply may not have sufficient knowledge of the business to command the obtained firm adequately. Attempts to maintain control may induce resentment by personnel of obtained firm. The resulting contraction of the efficiency may eliminate expected operating synergy or even reduce the post merger profitability of the obtained firm. The list of possible counter synergism factors could goon endlessly; the point is that the mergers do not always crops that expected results. Negative factors and the risks related to them also must be ackonwledged in appraising a prospective