Question 6 a. Nero’s management has a substantial ownership interest in the company, but not enough to block a merger. If Nero’s managers want to keep the firm independent, what are some actions they could take to discourage potential suitors? Answer: Nero’s management may consider to employ staggered board, Supermajority voting provision for merger, Golden parachute and Fair price amendments etc. as defence strategies’ pre-offer. Post offer, Nero may consider Pac man defence or Litigation, Leveraged recapitalisation, Share repurchase to stop being acquired.
One explanation appeals to be behavioral traits; the managers acquiring firms may be driven by overconfidence in their ability to run the target firm better than its existing management. This may well be so, but we should not dismiss more charitable explanations. For example, Firms can enter a market either by building a new plant or by buying existing business. If the market is not growing, it makes more sense for the firm to expand by acquisition. Hence, when it announces the acquisition, firm value may drop simply because investors conclude that the market is no longer growing.
The argument is that if firms expect to be bailed out, they will be more inclined to engage in risky business behaviors. In the financial world, one of the primary methods of doing so is to over-leverage the business. Companies will continue to borrow money to grow their businesses expecting that if they are in a liquidity bind, the government will come in to save them. Another type of risky business behavior is failing to oversee or properly assess business risks. The moral hazard of too big to fail institutions also applies to creditors.
You would buy the companies your group thought were good. You would also sell the companies your group thinks is not doing so well. These decisions will determine whether your group will get up to the higher place or not. Because of this, it is also the most stressful
Organizations make operational adjustments in order to survive global competition. When profits decrease, a cost reduction is usually suggested in order to return business to a profitable position by merging or acquiring new businesses (Shook & Roth, 2010). In response to a weakness in the current environment, economically, or competitive threats, there is a need for change. Mergers occur when two companies combine their operations and participate as equal partners in order to achieve strategic and business objectives (Sudarsanam, 2003). An acquisition occurs when one company takes over a smaller company and obtains control to determine how the combined operations will be managed (Shook & Roth, 2010).
First, this merger makes sense from a financial standpoint for AT&T to want to spend additional revenue on a merger with Time Warner and why Time Warner would want to do the merger as well. Additionally, there are several examples such as the Comcast and NBCUniversal merger, in which the acquisitions and mergers of large corporations like AT&T could continue with little to no governmental scrutiny. Next, the merger will not violate any anti-trust laws. Finally, this merger would be good for consumers because of the new and varied services that the conglomeration of AT&T and Time Warner could provide for its customers. Of this merger, there is one thing people can be certain of.
In such a case, the firm approaches the major shareholder to acquire its shares often at a significant premium above market price (Peyer & Vermaelen, 2005). This type of transaction is called “greenmail”. Second, a major shareholder might want to sell a large number of a firm’s shares, however the market for the firm’s shares is insufficiently liquid. If the market is illiquid, selling such a large portion of a firm’s shares might induce a substantial impact on the share price. To avoid such a disruptive impact the shareholder might approach the firm and negotiate the repurchase of shares via a private transaction.
For instance, in some cases natural action will be achieved by mistreatment identical name to market multiple merchandises. However, such extensions will have drawbacks, as seen by Al Ries and Jack Trout in their promoting classic, Positioning. Pitfalls of integration Horizontal integration by acquisition of a rival can increase a firm 's market share. However, if the trade concentration will increase considerably then anti-trust problems might
I. INTRODUCTION According Jensen and Meckling(1976, p 8), executives have a tendency to put more emphasis on their own interest when they share little mutual interest with shareholders. They would not take bold action but only try to maximize their perquisite. In order to mitigate such insincerity, executive compensation system have developed into two direction. First, companies offer substantial amount of remuneration to executives.
It notes that stiff competition can reduce the potential profit of like companies. Firms must determine the strategy that will be utilized to gain and maintain the upper hand in the industry, as it relates to price, marketing, competition and the introduction of new and innovative products into the market. The more a company senses competition the intensity of its strategy may increase as it does not only respond to other firms, but also to the industry as a whole. It is natural for firms to respond to competitive moves made by its rival as it will have an effect albeit positive or negative on the industry. Firms may be forced to supply the demands for cheaper but more reliable products or to create differentiated products to maintain the competitive