Corporate Merger Acquisitions
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Corporate mergers and acquisitions are quite common these days. In 2004 deals worth over $800 billion were concluded, up 50% from the previous year. This trend is expected to sustain during the rest of the decade.
Corporate mergers and acquisitions are quite common these days. In 2004 deals worth over $800 billion were concluded, up 50% from the previous year. This trend is expected to sustain during the rest of the decade.
Basically, mergers and acquisitions are meant for consolidation and growth of a corporation. For instance, a retail chain, which has a strong presence in the East Coast, wants to expand its business to the West. It could either put up its own facilities, which is a time-consuming process, or acquire a large chain or several local chains.
There could be other reasons as well for mergers and acquisitions. A profit-making company could benefit from tax write-off by acquiring one that is running at a loss. Certain mergers and acquisitions complement each other's capabilities and facilities. A small company with a good product but poor sales could gain by merging with or yielding to acquisition bid by an organization that has a strong marketing setup.
Different types of mergers and acquisitions are resorted to. Sometimes two solid corporations merge to become a much stronger entity. Another is a fledging company merging with a prosperous corporation. We often see subsidiaries being merged with the parent company. There is also a rather rare scenario called 'reverse merger' where the parent company merges with a subsidiary. If an Indian company merges with its U.S. subsidiary, it becomes an American company with operations in India.
While many mergers and acquisitions are negotiated, hostile acquisitions also take place. Here the company that is acquiring secretly buys controlling shares of the target company by using third parties.
Several big corporations are constantly in search of potential targets. Financial analysts help them in this process. Printed and electronic directories that provide details of companies, and software that helps to analyze company strengths and weaknesses, are available.
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