Audit Assignment(Abdul Rauf) - Abdul Rauf 1 07419243...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Abdul Rauf 1 07419243 Advanced Corporate Finance Assignment "In today's global business environment, companies may have to grow to survive, and one of the best ways to grow is by merging with another company or acquiring other companies,"( Jacalyn Sherriton) Although often synonymous mergers and acquisitions are two disparate adjectives. The latter is generally a more hostile takeover of a another concern whereas a merger is a meeting of two likeminded concerns who seek to create synergies and gain economic benefit from coming together. One successful example of a merger between equals would be the 1999 merger of Glaxo and Smithkline Beecham. The following assignment will discuss merger theory and practice and to seek out what if any benefits are created for the offeror and offeree. To begin with we ought to start from the basics and define what the aforementioned terms refer to. In essence the “offeror” being the instigator and the one offering to purchase. The “offeree” being the target concern and the one accepting or not as maybe the case. Mergers and acquisitions these days has become very common and we can see companies and other businesses merging every now and then (Intel and Wind River). It is true that merger of two companies makes both the businesses strong in terms of finance and competition and helps the business grow rapidly. There is a saying that “united we stand divided we fall” therefore when two companies come together it is not easy to give them competition because of their increased value and combined ideas because more people means more ideas. When one company takes over another company it brings more efficiency into the business and reduces costs and overheads of the company and allows it to grab more of the market share. This mostly happens when the parent company is too strong to compete against or the subsidiary company is at the verge of being bank corrupt or when both the businesses realise that they cannot survive individually. Before the merger takes place all the interests of stakeholders are also taken into account so that they don’t have problems later on. It is very important for both offeror and offeree to keep it confidential until the merger takes place because if customers, suppliers, employees, shareholders, or other parties find out about the merger it can result in a loss to the target company. Mergers and Acquisitions (M&A) is a tool for expanding a business and gives it different laws and regulations such as tax laws and monopoly. M&A companies enjoy economies of scale as their costs are reduced due to expansion. Business’s Average cost per unit and marginal costs falls when the scale of production is increased and eliminating duplicated facilities or departments also reduces costs and market share of the business increases. This allows access to new markets which results in higher
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 5

Audit Assignment(Abdul Rauf) - Abdul Rauf 1 07419243...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online