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Examine the financial risks of merging with or acquiring an organization in another country and how those risks could be mitigated.

A. Mergers and Acquisitions Paper

Assess the impact of mergers and acquisitions on business, including "sensible" and "dubious" reasons for, and benefits and costs of, cash and stock transactions. Examine the financial risks of merging with or acquiring an organization in another country and how those risks could be mitigated.

Be sure to support your position using information from the assigned text(s) reading and other sources. Be sure to properly cite all sources.

Solution Preview

Assess the impact of mergers and acquisitions on firm, including "sensible" and "dubious" reasons for, and benefits and costs of, cash and stock transactions. In your paper also be sure to examine the financial risks of merging with or acquiring an organization in another country and how those risks could be mitigated.

Why are there mergers and acquisitions? Mergers, amalgamations, acquisitions, takeovers and conglomerates materialize for an assortment of reasons, such as maximizing expansion, dipping risk through diversification, lowering the price of financing, and so on. But the act of the new entity after merger may lag behind because of the high cost of co-coordinating varied and unrelated economic activities. Kindly think in the following terms: Diversification by conglomerates may also reduce technical efficiency. One cannot fail to notice the trend towards diversification in unrelated firm instead of focusing on core areas. Because of merger, a bigger entity comes into being and it may wield undue political and economic influence.

IMPACT OF MERGERS AND ACQUISITIONS
Who gains from mergers? Studies demonstrate that most of the benefits from mergers and acquisitions were earned by the selling firm, not the acquiring company. This was especially true in the case of tender offers to buy a target's shares publicly. Please think of the following
A study found that holders of the target firm usually earned a 30% on their investment, while holders of shares in the acquiring firm usually earned a 4% return on their investment with the completed acquisition. We need not infer from this finding that mergers and acquisitions do not create benefits; rather commonly acquiring companies simply pay too high a price for their acquisitions. You should think of the following: The reasons given for acquisition are expansion not limited by internal resources, there is no drain on working capital - can use exchange of stocks, faster - buy available assets, instead of building, cheaper, if creating new assets is more expensive ...

Solution Summary

Extensive response (1,196 words plus many internet resources) helps the student identify risks and ways to mitigate them.

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