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Merger & Acquisition: Concept, Factors determining price

Complete the M&A Finance Paper. Need help with 1 & 2 only!

1. Pros and cons of merging or acquiring another company
2. Factors determining price paid

Please provide references!

Solution Preview

I have provided a general perspective of Mergers & Acquisitions and the general factors that determine the price paid for a M&A.

You can try to apply these principles to your specific case of Sony-MGM merger.

I gave general introduction to M&A, then pros & cons of M&A and general factors that determine price of M&A.

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Mergers and Acquisitions

Why Mergers and Acquisitions?

M&A are generally used by organization to expand into new business or organization that are trying to exit from a business. The organization that wants to exit is acquired by organization that want to expand the business.

IPO are a way of starting new ventures or expanding business but the cost of conducting an IPO has significantly risen in recent years due to the passage of the Sarbanes-Oxley Act and an increase in regulations required by the SEC and the various exchanges. Combining this cost increase with the need for consolidation and improved performance by many companies, M&A is now the dominant exit strategy.

M&A deals often yield the best terms for companies with strong growth prospects rather than a solid past performance. In other words, terms of a combination or acquisition are likely to be much more favorable for companies with a solid market share and the potential to improve margins.

Pros & Cons of M&A

Pros of M&A

Accessibility: A merger or acquisition usually gives the target company access to additional resources that it did not have as a standalone entity, ...

Solution Summary

Solution clearly explains the concept of Merger & Acquisition in general and the factors that determine the price to be paid by acquiring company, etc.