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Mergers And Acquisitions Mergers And Acquisitions The value of mergers and acquisitions remain a topical issue within the contemporary business world.
Whether these activities are beneficial to the economy or are simply meant to stifle competition is open to debate. It is crucial though that when this process is put under the spotlight, one must consider the impact on shareholders, creditors, employees, management, and customers of participating companies and competing firms.
It is likely that not every group mentioned will benefit from mergers and acquisitions, but a commonly accepted criterion is that the outcome is socially desirable if the benefits exceed the costs.
Several measures have been proposed for analysing the success of mergers and acquisitions. Some mergers and acquisitions simply occur because managers of the acquiring firm may want to see their corporations grow bigger so as to gain control of the company and attain monopolistic power, hubris.
Further to the theoretical overview provided in the previous chapter, the literature review covers an overview on mergers and acquisitions and whether the afore-mentioned lead to the creation of shareholder value.
This is done by reviewing the literature on the effects of mergers and acquisitions for both the acquiring firm and the target firm's shareholders. The purpose of this study is to explore the field of mergers and acquisitions in South Africa with the aim of evaluating the value that these bring to the economy in terms of wealth creation.
The focus of accounting research questions whether there has been an improvement in the numbers of accounting that follow mergers and acquisitions.
Evidences from prior research have been mixed with studies that provide a demonstration that merger and acquisition result in improving the profitability even though most of the studies have concluded that the merger and acquisition do not foster improvements in performance. Bild and Guest go on to note that, within this process, the share price for the acquiring companies generally increases relative to that of the acquired company.
This is an important facet to consider bearing in mind that the main role of management in business is to increase the shareholders' wealth. Bild and Guest However, Tchy believes that at times the reasons behind mergers and acquisitions are overvalued and the figures that are presented during the merger or acquisition process are not necessarily a true reflection of the facts.
This becomes less obscure in the long run when companies become less profitable and shareholder wealth is compromised.
Based on a financial theory perspective, Bild and Guest note that in determining the value that mergers and acquisitions bring to shareholders, it is essential that the present value of the financial gains from these activities are greater than the financial gains of the individual companies before the merger or acquisition process.
This however, as most studies have shown, is not an easy feat as the exact costs of the whole process including any synergies are difficult to quantify.
A considerable amount of research on mergers and acquisitions exists with diversity in the findings and inconsistent evidence validating the role of mergers and acquisitions in improving firm performance.
Studies conducted to review overall merger performance and to identify specific determinants of merger and acquisitions success noted that many mergers and acquisitions fail to live up to post merger expectations Ramaswamy, The importance of understanding the factors that contribute to merger success is further explored when the researchers examined the impact of change management as one factor affecting merger outcome.
Researchers also indicated that there is a need for a more in-depth investigation of conditions under which these transactions create or destroy value. This results in the possibility that a broader set of factors may influence the outcome of mergers.
Underlying merger and acquisition literature do not combine to form one base theory and consistently centers on merger motivations related to efficiency theory, agency theory and resource theory.
With the considerable amount of research done on mergers and acquisitions, diversity exists in the findings with inconsistent evidence validating the role of mergers and acquisitions of improving firm performance. The net effect of mergers and acquisitions remains unclear despite the number of research studies done.
Rationalisation of cross-border merger and acquisitions transaction requires an in-depth explanation of the cross-border aspect of the transaction. The research from Brakman, Garretsen and van Marrewijkemphasises that strategic motives is one of the key reasons that triggers most cross-border merger and acquisition deals.
Buying a firm outside of one's own sector might be motivated by an efficiency motive since it can be profitable to control a larger part of the value chain. Additionally, Brakman et al argues that since most cross-border merger and acquisition activities belong to the category of an economic concept known as Foreign Direct Investment FDI.
Research analysing the determinants and causes of international bank mergers by Buch and DeLong concluded that economies of scale and scope is one of the major motives to increase the need and trend of international mergers.
Neary studied international cross-border bank mergers between andand utilised a theoretical framework proposed by Pehrsson that categorised bidders into strategic market-asset and efficiency-seekers.
As an example, Schmautzerin his framework indicates that banking mergers and acquisitions are motivated as market-seekers to aim for financial synergies through geographic diversification, motivated as asset-seekers to aim for financial product diversification, and motivated as efficiency-seekers to be primarily interested in operational synergies.
According to Jagersmathe decision to make an acquisition is first and foremost a strategic one, and to a much lesser extent a financial one. Jagersma offered six reasons which included; economies of skills, expansion, economies of scale, market entry, geographic risk spreading and financial.One Essex Court is a leading set of barristers' chambers, specialising in commercial litigation.
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Mergers and acquisitions have become an important medium to expand product portfolios, entering new markets, which would enable the company, compete on a global scale (Yadav and Kumar, ).
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Advising Clients in Mergers and Acquisitions provides an authoritative, insider's perspective on best practices for representing. Nov 19, · Essay on Merger, Acquisition, and International Strategies. An important aspect of strategic management relates to business growth due to mergers and acquisitions.5/5(1).
Mergers and Acquisitions (MandA) is well known as one of significant business activities all around the world which have attracted the attention of every business administrators in the economic competition.
In the intense competition, companies have to tackle many difficulties and desire to become. 1. Introduction Mergers and Acquisitions (MandA) is well known as one of significant business activities all around the world which have att.