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

Funds management, who are the participants in the hedge funds industries

who are the participants in the hedge funds industries

Define the common pattern of cash flows, What is the common pattern of cash...

What is the common pattern of cash flows for a share of preferred stock? How does the market define the value of a share of preferred stock, specified these promised cash flows?

What are the weaknesses of the traditional approach, What are the Weaknesse...

What are the Weaknesses of the traditional approach The traditional approach to the scope of finance function evolved during 1920s and 1930s and dominated academic during 40's

Engagement completion document, Engagement Completion Document - A document...

Engagement Completion Document - A document whereby AUDITOR identifies all significant findings or issues. Document must be as specific as essential in the circumstances for a revi

Explain the meaning of buy-ins, Explain the meaning of Buy-ins This  is...

Explain the meaning of Buy-ins This  is  when  third  party  management  team  make  a  takeover  bid  and  then  run  business themselves. Finance sources are same as to buy-o

Disadvantages of just-in-time inventory management, Q. Disadvantages of jus...

Q. Disadvantages of just-in-time inventory management? A JIT inventory management system mayn't run as smoothly in practice as theory may predict since there may be little room

hazard or risk , For this assessment, you are required to choose one workp...

For this assessment, you are required to choose one workplace hazard or risk to safety in the financial services industry that interests you. Prepare a report on the area you have

Explain the concept of working capital, Q. Explain the concept of working c...

Q. Explain the concept of working capital. Distinguish between variable and permanent working capital. What is the significance of such distinction in financing working capital req

Calculate most profitable investment, TC  Shipping Ltd has decided to purch...

TC  Shipping Ltd has decided to purchase a machine to augment the company's installed capacity to meet the growing demand for its products. There are three machines under considera

Strategies of hedge funds, Strategies of Hedge Funds: Hedge funds use ...

Strategies of Hedge Funds: Hedge funds use a range of different strategies, and each fund manager can argue that he or she is unique and could not be compared to other manager

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