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Acquisitions and Shareholder Losses

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Many corporate acquisitions result in losses to the acquiring firms' stockholders. A coworker has asked you to explain what a firm would gain from purchasing another corporation. Explain to the coworker the fundamentals of corporate acquisitions.

Research corporate acquisitions using your text, course materials, and Web resources and then 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

This solution discusses a series of business questions regarding acquisitions.

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Corporate Acquisitions

Corporate acquisitions involve a firm purchasing another company so as to create a better shareholder value high above the sum of the two companies. Merging and acquisition of two companies are more valuable unlike if the two companies were separate. Companies will purchase other corporations especially during hard times so as to create a more cost efficient company. In addition to this, strong companies will buy other companies so as to increase their competitiveness as well as to gain a more competitive market share that will enable it achieve a greater ...

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