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Firms Purchasing other Corporations

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Please help answer the following questions.

- Why do firms purchase other corporations?
- Do firms pay too much for the acquired corporation?
- Why do so many acquisitions result in shareholder losses?

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Solution Summary

The solution discusses why firms purchase other corporations, why firms pay to much for an acquired corporation, and why many acquisitions result in shareholder losses. Two references are included in the solution.

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Why do firms purchase other corporations?
- There are any number of reasons. One is to gain economies of scale. Some companies want to expand into other areas or product lines and this is a good way to do it. Companies acquire other companies to gain assets. Cash, equipment, capital, property, and intellectual properties and knowledge are reasons to acquire another firm. Some companies are looking for better reputation, branding, and visibility in the markets at home or abroad and they will acquire a company with those already established criteria. All companies that acquire ...

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