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Explain why mergers can add value? What other factors should organisations take into consideration prior to an acquisition?
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Explain why mergers can add value? What other factors should organisations take into consideration prior to an acquisition? When on the topic of mergers, many people, for various reasons differentiate between the terms merger, acquisition and take-over. In this essay I will use the terms interchangeably, as most commentators do, because in reality many combinations of companies do not fall into such neat categories, and to many the distinction is debatable. I will work round Glen Arnold's definition of a merger as the "combining of two business entities under common ownership" (Corporate Financial Management, P. 869) Economists classify mergers into three categories - horizontal, vertical and conglomerate. If the merger takes place between firms which serve the same markets, and produce similar, or substitutable products or services, e.g. banks, then it is deemed to be a horizontal merger. One of the motives for horizontal mergers would be the opportunity to reduce...
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