What are the reasons for mergers and acquisitions, Financial Management

Assignment Help:

Reasons for mergers and acquisitions

The key reasons for mergers and acquisitions, is to maximise shareholder wealth otherwise it wouldn’t be worthwhile.

Reasons for mergers and acquisitions

Economies of scale

Larger capacity results in reduced costs. With vertical integration it's easier to achieve this as duplication is avoided. For conglomerates, combining of some of the departments will achieve this (centralised head office, HR department, Marketing etc.)

Increased market share

Thus increasing profitability and becoming a leader in the market, which improves earnings quality.

Improved efficiency

Poor management and inefficient operations would be improved.

Reducing the competition

Profitability can be increased if competition was removed. However the implications from the competition commission need to be considered.

Tax relief

Group companies and taxation relief. A company which is not being able to obtain tax relief as it isn't generating profits can merge or acquire a company which generates profits.

Liquidity

Target company may be cash rich and this will improve group's statement of financial position (balance sheet).

Asset stripping

Acquiring other entity and then selling off their assets.

Diversification

This helps reduce risk by attaining businesses in other industries.


Related Discussions:- What are the reasons for mergers and acquisitions

What are the predator shareholders, What are the Predator shareholders ...

What are the Predator shareholders Predator company's shareholders mayn't approve the bid for various reasons. Reduction in EPS If consideration is

Accounting framework - convention of materiality, Accounting Framework - Co...

Accounting Framework - Convention of Materiality Materiality means relative significance. In other words whether a matter should be disclosed or not in the financial statement

Ledgers, Ledgers: Ledgers record all the entries into the Cash Books. T...

Ledgers: Ledgers record all the entries into the Cash Books. They use the concept of 'double entry' bookkeeping where every ledger entry must be accompanied by another ledger e

Caselet 2, SUGGESTION REGARDING CREDIT LIMIT. SHOULD IT BE APPROVED OR NOT,...

SUGGESTION REGARDING CREDIT LIMIT. SHOULD IT BE APPROVED OR NOT, WHAT SHOULD BE THE AMOUNT OF CREDIT LIMIT THAT ELECTRONICS GIVE TO BOOTH PLASTICS

Common-size statement value, A firm has sales of $6,500, net income of $500...

A firm has sales of $6,500, net income of $500, total assets of $12,000, and total equity of $700. Interest expense is $1000. What will be the common-size statement value of the in

Optimal cash model, Optimal Cash Model: Cash Management is a bigger as...

Optimal Cash Model: Cash Management is a bigger aspect that involves range of functions that assist individuals and business to process their payments and receipts in an organ

Implications of gordon’s fundamental valuation, Q. Implications of Gordons ...

Q. Implications of Gordons fundamental valuation? Explanation: - The implications of Gordon's fundamental valuation may be as below: (1) While the rate of return of the firm

Treasury strips, A treasury strip can be sold in two parts based on i...

A treasury strip can be sold in two parts based on its components. When the investor is empowered with a right to receive the coupon payments on sale of its treas

Benefits of going private company, Benefits of Going private company A...

Benefits of Going private company A public company has its shares purchased by a small group of people and ceases to be listed on stock exchange. This has many benefits includ

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd