Distinct economic functions are 1 it improves

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Distinct economic functions are: 1. It improves risk/return ratios through diversification. 2. It avoids “gambler’s ruin” (an adverse run of losses which might cause bankruptcy) 3. Establishing programs of financial planning control. These systems improves the quality of general & functional managerial performance, there by resulting in more efficient operations & better resource allocation for the economy. Managerial conglomerates Conglomerate firms which provide managerial expertise, counsel & interaction on decisions to operating units. Mgt conglomerate not only assume financial responsibility & control, but also play a role in operating decisions & provide staff expertise & staff services to the operating entities. Generic mgt functions are: 1. Planning, organizing, directing & controlling are readily transferable to all types of business firms. This theory argues for mgt transferability across a wide variety of industries & types of orgns including govt, nonprofit institutions and military and religious orgns. CONCENTRIC COMPANIES A merger in which there is carry –over in specific mgt functions (ex: mktg) or complementarily in relative strengths among specific mgt functions rather than carry-over/complementarities in only generic mgt functions (eg: planning). Therefore, if the activities of the segments brought together are so related that there is carry over of specific mgt functions (mufg, finance, mktg, personnel, & so on) or complementarily in relative strengths among these specific mgt functions, the merger should be termed concentric rather than conglomerate. Ex: if one co., has competence in research, mufg., or mktg that can be applied to the pdt problems of another co., that lacks that particular competence, a merger will provide the opportunity to lower cost function. Firms seeking to diversify from advanced technology industries my be strong on research but weaker on pdtn., and mktg., capabilities firms in industries with less advanced technology. Motives being merger (Reasons, logic, Benefits, Causes) 1. Limit competition 2. Utilize under-utilized market power 3. Achieve diversification 4. Overcome the problem of slow growth & profitability of one’s own industry 5. Utilize under utilized resources like, human, physical & managerial skills 6. Reap speculative gains attendant upon new security issue/change in P/E ratio. 7. Achieve growth potentiality 8. Achieve profitability 9. Maximize the shareholders wealth 10.Diversifying the risk of the company 11.Gain economies of scale & increase income with proportionately less investment 12.Displace existing management. 13.Circumvent government regulations. 14.Establish a transnational bridgehead without excessive start-up costs to gain access to a foreign market.
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Motives behind M&A The dominant rationale used to explain M&A activity is that acquiring firms seek improved financial performance. The following motives are considered to add shareholder value Synergy : This refers to the fact that the combined company can often reduce duplicate departments or
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