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Mergers and Acquisitions - Shareholder's Wealth

Discuss how a researcher might identify whether the GlaxoSmithklein and Astrazenca acquisitions eventually prove to be successful in increasing their shareholders' wealth.

Discussion of corporate strategy to maximize shareholder wealth:
- Merger and acquisition activity is analyzed as part of company strategy to deliver shareholder value using features of specific companies and their acquisitions.
- The understanding gained from the literature review is applied to the case study companies
- Conclusion are made as appropriate from the available evidence, including recognition of limitations of the evidence and method.

Discussion of identifying success in acquisitions:
- A critical understanding of research method derived from the literature review is demonstrated in the context of the case study companies.

Solution Preview

There have been arguments on the purpose of mergers and acquisitions as motives for increasing stock prices which means increasing shareholder's wealth. Firms which have one product line reduce their risk by diversification through mergers and acquisitions. Firms which have multiple product lines can take advantage of mergers and acquisitions to combine resources and become more efficient. With economies of scale firms are able to reduce cost of production. Another reason for mergers and acquisitions is to expand geographic reach. A firm can merge with another firm in the same industry located in different region. When firm engages in merger and acquisition with intent to increase shareholder value, it intends to improve firm's earning and increase share price.

Researches in the past have attempted to analyze if mergers and acquisitions affect shareholder's wealth by understanding market reaction to the move. The literature review has considered organization to be continuously evolving. According to Gaughan (1996), the first merger wave took place in the period from 1897 to 1904. The firms involved in mergers during this period were in manufacturing and mining industries. The first billion dollar mega merger deal was between U.S. Steel which was founded by J.P.Morgan with Carnegie Steel which was founded by Andrew Carnegie. Later, the firm merged with other rivals and at a time 785 different ...

Solution Summary

Discuss how a researcher might identify whether the GlaxoSmithklein and Astrazenca acquisitions eventually prove to be successful in increasing their shareholders' wealth.

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