Findings definition of merger and acquisition an

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Findings Definition of Merger and Acquisition An understanding of the merger and acquisition is essential in identifying the importance of M&A. With its initiation in the nineteenth century as a method of reorganization and
Actavis and Allergan Inc.’s Merger 5 consolidation, mergers and acquisition have developed to become one of the primary strategic options for companies that seek to be more competitive, secure their market position, and globalize their market. According to Gerven (2010), a merger can involve one participating company absorbing the other participating company, all the participating firms dissolves and form a new one, or a subsidiary joining with its parent company. A merger is different from an acquisition because a merger results in the formation of new company while an acquisition encompasses the acquiring firm retaining its legal identity and incorporating a new firm into its own activities. Reasons for Actavis and Allergan, Inc.’s Merger Actavis paid 0.3683 of its share for each of Allergan’s common stock and a total of $129.22 in cash in its acquisition of Allergan (Summerfield 2017). Three months after the acquisition, Actavis changed its name and started using Allergan. The company decided to move its operations to California, Allergan’s previous headquarters, and New Jersey. Actavis acquired Allergan to enable it enhance its synergy. By combining their business activities, the two companies projected that their operation costs will decrease and their performance will increase. Often, a company attempts to merge with or acquire a company that has complementary weaknesses and strengths. Since the two companies were among the top ten global pharmaceuticals, their merger resulted in the development of a premier pharmaceutical pipeline and an experience management team committed to maintain highly efficient operations (Allergan 2015). Actavis also acquired Allergan, Inc. for growth purposes. Mergers always provide the acquiring firm with the chance to grow its market share without having to go through the challenging tasks of marketing. Instead, an acquiring company purchases its competitor’s
Actavis and Allergan Inc.’s Merger 6 business at an agreed price. According to Allergan (2015), its growth profile has increased significantly because of its merger with Actavis. The expanded base of the combined company has also provided it with the ability to deliver sustainable organic earnings growth. Allergan estimates that the merger will generate double digit accretion to non-GAAP earnings in the first year and a strong free cash flow exceeding eight billion dollar in 2016 (Allergan 2015). Actavis and Allergan also merged to enable them eliminate competition. Most M&A deals are focused on allowing the acquirer eliminate future competition and gain a substantial share of its products’ market. Since Allergan was a threat to Actavis in the international pharmaceutical industry, Actavis decided to eradicate the threat by acquiring Allergan. The

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