acf assinmnt - One plus one makes three this equation is...

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One plus one makes three, this equation is the special alchemy of merger or an acquisition. The main reason behind buying a company is to create over and above that of the sum of two companies. Also two large companies together are more valuable than two separate companies. The following assignment will critically evaluate the theory of mergers and acquisitions and do mergers create value for the offeror and offeree. Many strong companies will act to purchase other companies to create a more competitive, cost-efficient company; a good example of this would be a Lloyds TSB takeover of its rival HBOS, which owns Halifax and Bank of Scotland (timesonline). The reasons why two companies come together are to gain a greater market share or to achieve greater efficiency. Because of these greater benefits, target companies will often agree to be purchased when they know cannot survive alone. There are many reasons why companies merger together, one of the reasons might be improve market reach and industry visibility, many companies will buy another company to reach new markets and grow revenues and earnings. A merge may expand two companies marketing and distribution, giving them new sales opportunities. Also a merger can improve a company’s standing in the investment community, which means that bigger firm often have an easier time raising capital than smaller ones. There are also others reasons why two companies merger together such as acquiring new technology, to stay competitive, large firms need to stay on top of technological developments and their business applications, so therefore large firms buy smaller company with unique technologies, so that a large company can maintain or develop a competitive edge. The main advantage of merging a company is economies of scale. When two companies merge, their combined revenues should, in theory, remain the same. However, as a joint operation they can consolidate multiple departments and operations, lowering relative costs in comparison to the new, increased overall revenue. Thus, mergers should increase the profits of the new company beyond the combined profits
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This note was uploaded on 10/24/2010 for the course ACCOUNTING INFS2005 taught by Professor Steven during the Three '10 term at Australian National University.

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acf assinmnt - One plus one makes three this equation is...

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