Global Economic Crisis - and acquisitions was the release...

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The most recent boom in acquisitions and mergers was sparked by lower interest rates resulting in cheaper credit; and an expansion in global competition which made companies desire to reduce or eliminate that competition by buying each other out. However, based on the uncertainty in the commercial credit markets, investors were reluctant to take the risk of acquiring or merging with other companies for fear of increasing decline in the stock market, which historically, tends to drive merger activity. “By the end of 2008,uncertainty in the commercial credit markets had led to anxiety about whether merger transactions could continue to be achieved successfully in the current environment, and by the middle of 2009 M&A activity had nearly come to a halt” (Jeter & Chaney, 2010, p. 1). Prior to the current recession, a blip on the merger radar can be seen in direct correlation to the Enron, WorldCom and Tyco scandals. Another possible explanation for the decrease in mergers
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Unformatted text preview: and acquisitions was the release of new accounting standards by the FASB. Possible acquisitions may have been postponed to conduct further research assuring these new standards would not hinder projected estimates of a merger. All in all, it seems mergers and acquisitions are directly related to the rise and fall of the stock market. Currently, with the US in a recession, and global markets shaky at best, businesses are biding their time waiting for their stock prices to increase enabling them to amass enough money to engage in a merger. “Increased stock valuation increases a firm’s ability to use its shares to acquire other companies and is often more appealing than issuing debt” (Jeter & Chaney, 2010, p. 1). REFERENCE Jeter, D., & Chaney, P. (2010). Advanced Accounting (4 th ed.). Hoboken, NJ: John Wiley & Sons, Inc....
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