Mergers and Acquisitions

Essay by bakerboobooUniversity, Bachelor'sA-, February 2008

download word file, 6 pages 3.0

Mergers and acquisitions (M & A) are some of many strategies businesses employ to help significantly increase shareholder value. Although mergers and acquisitions are thought to be synonymous with one another, both terms have separate meanings and have separate business outcomes. A merger happens when two companies come together and create a single new company. New stock is then issued as that new company. In an acquisition one company is bought out by another one. The bought company is seen as swallowed by the buyer and ceases to exist (Investopedia, 2006). The contents of this paper will asses the impact of mergers and acquisitions on businesses, including "sensible" and "dubious" reasons for, and benefits and costs of, cash and stock transactions. In addition, there will be a brief discussion on the financial risks of merging with or acquiring an organization in another country and how those risks could be mitigated.

Impact of Mergers and AcquisitionsThe biggest impact of a merger or acquisition will be on the employees of that company. When mergers take place one of the most common occurrences are layoffs. Mullens states that after the merge, if the company becomes a much more efficient entity then they will not need as many workers to do the same amount of business (2001). For those who are chosen to stay they may need to adjust to a new organizational culture that is unfamiliar to them. Employees from the acquired company may have to learn new standard operating procedures and customs. New adjustment may prove to be an enlightening experience or a very stressful one for some (Mullens, 2001). An additional impact is that when mergers or acquisitions occur there will be major debt accrued, especially is debt was used to finance the M &A. Taking on a huge...