Mergers and Acquisitions History Essay Example | Topics and Well Written Essays - 750 words

Mergers and Acquisitions History - Essay ExampleThis paper seeks to explore mergers and acquisitions as well as their inherent benefits and drawbacks. These business practices willing also be examined in the context of distant interaction.There are slightly sensible basiss for executing mergers and acquisitions (M&As). The most obvious campaign is profitability. Deals can be worth hundreds of millions, or even billions, of dollars. They can dictate the fortunes of the companies involved for years to come. For a CEO, leading an M&A can represent the highlight of a whole career (http//www.investopedia.com/university/mergers/, 2007). Another sensible reason is the gain of power by way of absorption. Absorption involves the securing of a competitors resources which, in turn, increases the absorbing connections clout and influence. The net reason, for purposes of this analysis, is for companies to gain more appeal in the international market. If foreign investors can be persuaded t o contribute to a particular company, that companys economic success can be significantly enhanced.There are also some dubious reasons that come with the M&A game. One major obstacle is the time factor. The process of securing M&As can take considerable time to complete. Negotiations whitethorn fall through and/or companies may not be willing to engage in tedious legal wrangling. Another dubious reason is the inadequate protection from the law. Depending upon the state in which the companies operate, the law may or may not amply protect either one in terms of unfair business practices or hostile takeovers. money transactions are one way to effectuate a merger or acquisition. In these types of transactions, a company can seize some or all of another companys assets. This can be just in that tangible property can be assimilated into a companys operation. However, a cash purchase will be a taxable merger, whereas a stock exchange will not be taxable. In a taxable merger, there are ca pital gains effects and asset write-up effects to consider (highered.mcgraw-hill.com, 2007). timeworn transactions are another way to effectuate a merger or acquisition. In these types of transactions, the touch of shareholders comes in to play. In stock transactions, shareholders still retain their interest it just gets transferred to the absorbing company. One glowing, exacting benefit of these transactions is the tax consideration. Certain exchanges of stock are considered tax-free reorganizations, which permit the owners of one company to exchange their shares for the stock of the acquirer without paying taxes(www.referenceforbusiness.com, 2007). The major disadvantage of this arrangement is that there is usually no transfer of tangible assets which, in turn, will not yield a transfer of title.When merging with or acquiring an organization in another country, there are some risks that mustiness be strongly considered. Arguably, the most significant risk encompasses this con sideration A short history of precedent M&A activity and minimal financial disclosure pose various valuation issues this is often compounded by unrealistic valuation expectations on the part of vendors (www.ey.com, 2007). Companies that are interested in immersing themselves in foreign markets must thoroughly research economic trends and general business practices. Another serious risk is the