M & A Failures Paper

M & A Failures Paper - M A Failures Paper 1 Mergers...

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M & A Failures Paper Mergers and Acquisitions Failures Paper Mergers, Acquisitions, And Corporate Restructuring FIN/444 November 10th, 2008 1
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M & A Failures Paper Introduction Though the management of a firm would never willingly go into a merger that they knew would fail it is important to know the reasons why those mergers that fail do so. With knowledge of how and why mergers fail, management can avoid those deals that have a likelihood of failing. Also management must have a working knowledge of what happens to a firm when a merger fails so as to avoid pitfalls and take advantage of opportunities. Finally management must understand the benefits and disadvantages of restructuring and the different methods by which this could be done. The more knowledge management has in this often complicated area of business the more likely that they will make good decisions regarding mergers and restructuring options. Merger and Acquisition Failures When a merged business fails there can be a number of consequences. One possibility for a failing firm is bankruptcy. Though there are a few different types of bankruptcy the basics are the same, the firm is unable to pay its debts and takes a legal action to get at least a portion of the firms’ debts paid. According to Investopedia.com (2008) bankruptcy is, “A legal proceeding involving a person or business that is unable to repay outstanding debts. The bankruptcy process begins with a petition filed by the debtor (most common) or on behalf of creditors (less common). All of the debtor's assets are measured and evaluated, whereupon the assets are used to repay a portion of outstanding debt.” In a bankruptcy action stockholders can be badly hurt as their interests in the firm are considered to be subordinate to those of debt holders. This can also 2
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