Mergers & Acquisitions

The idea behind companies engaging in mergers and acquisitions is to build a stronger, more competitive combined company in the marketplace. on that point are many things within a merger that pitch impact a business including benefits and costs, sensible and dubious motives, risks associated with outside mergers, and determining whether to initiate a cash or stock(prenominal) transaction for the merger. Mergers are a tool used by companies to expand their operations and increase profitability. When companies put away in a merger, the acquiring company assumes all assets and liabilities of the target company. A merger, or merger of equals, is often financed by stock, known as a stock swap. There are two modes of merging by stock swap, which include one company taking forget power of the other company and issuing cash and/or securities in the acquiring company to the former shareholders, or other method includes creating a third company which takes ownership over both( prenominal) companies in exchange for shares issues to the shareholders of the two companies (wikipedia.com). If stock is forwardered to acquire a company, the cost of the merger depends on the gains and those shares are paid to the acquired profuse (Brealey, Myers, & Marcus, 2004, p. 599). Companies can also acquire other companies by carry cash.

Acquisitions financed through debt are called leveraged acquireouts or LBO. Often the assets of the company earth acquired are used as collateral for the loans in addition to the assets in the acquiring company. The benefit of a leveraged buyout is to allow companies to buy up large sums of money without committing a lot of their capit al. In a cash transaction, the cost of the m! erger is not touch by the size of the merger gains (Brealey, Myers, & Marcus, 2004, p. 599). Also, the shares of a leveraged buyout are interpreted off the public market and are no time-consuming traded on the open market. There are sensible motives for companies to engage in mergers and acquisitions (M & A). Sensible motives that...If you want to get a all-inclusive essay, station it on our website: OrderEssay.net

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