Monday, June 10, 2019
The Effects of Merger and Acquisitions on the Recent Worldwide Assignment
The Effects of Merger and Acquisitions on the Recent Worldwide Financial Crisis - Assignment ExampleMergers occur when two or more entities distinguish together (in a form of partnership) to form a single trading unit- the entities cease to exist and form a new firm. A good mannequin is the merger of two banks Lloyds TSB and HBOS, following the global financial crisis, to form Lloyds TSB-HBOS (Rosenbaum, 2009). Acquisitions on the other hand, refer to one entity, the bidding company, taking over a betoken entity, by acquiring, through purchase, of its stakes that could include shares, stocks (majority control of its capital) or assets. For example, Lehman Brothers was declared bankrupt (at a debt of 613 Billion Dollars) due to the recent global financial crisis was bailed discover by the American Federal Government (Mihm, 2010). Therefore, the major distinction between mergers and acquisition is the position of the shareholders. In mergers, the shareholders exchange their shares for shares of the new entity, while in Acquisitions the fall guy company is bought out, with shareholders paid in cash or debt. Objectives of Mergers and Acquisitions The current wave of M&A began in 2005. A report by the International pecuniary Fund indicates that, during this time, the worlds real GDP grew by 4.8%. ... Many business firms opt for M&A due to many reasons. To state briefly, it is argued about firms, go for M&A, to cut on production costs that, it is cost effective in the long run to merge with or read a firm producing a raw material for the larger firm. This saves on foodstuff exchange costs while the synergy due to M&A cuts on departmental and running costs, compared to an increased revenue stream from a large market share and a centralized management. Secondly, M&A is seen to achieve militant advantage, due to new market knowledge and goodwill acquired, territorial advantage of the native firm acquired. A firm will merge or acquire another(prenominal), and exc el in the new market, due to the knowledge and experience of the target entity, as opposed to efforts of the bidding company going to it alone, in the foreign market (Shan & Hamilton, 1991). Another reason for M&A is the financial advantage of tax reliefs. It is argued that a company which reports loses, is more analogously to be bought off by another profitable one, as the target companys reported loss will be utilized in reducing tax liability. However, most governments like the United States have legislations that limit and check against this practice (Mihm, 2010). A statistical study by Emirates Centre for Strategic Studies & Research indicated that, the Arabian banks and Companies, which are smaller in size compared to similar foreign institutions needed to merge so as to remain globally competitive. Also, indicated in the report is because, in the first threesome quarters of 2008, there were 48 mergers in the Middle East only (Emirates Centre for Strategic Studies and Resea rch, 2009). Shan & Hamilton in their article country-specific advantage and
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