Financial Management

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Discussion Board

The response addresses the queries posted in 531 words with references.

//Prior to talk about the corporate acquisitions resulting into losses, and reasons behind purchase of other corporations, we have to first of all, discuss about the exact meaning of the 'acquisition'. So that it assists you in understanding the following questions. Thus, initially, we will write about acquisition under the heading of Introduction, for example: //

Introduction:

Acquisition may be defined as an act of adopting business firm's take, on significant quantity of shares or voting rights of the target company. Thus, it is conceived that two different companies, which come under acquisition can enjoy their independent existence; and can act as two 'legally separate' entities. But in contrast, the control of both companies is varied from each other. In the recent time, it has become more popular due to raised level of competition, breaking of trade barriers, free flow of capital across countries, etc. (Acquisition, 2009).

//Above, we talked about the acquisition, which is the quickest way to attain expansion. As per directions, now we will discuss about reasons behind purchase of other organizations. In this part, we will also discuss that acquired firm is paying too much for the target corporation or not. I tried to furnish the major information, but you are free to add other information to the arguments, which you find more suited.//

Reasons:

Most of firms purchase other corporations, in order to render the maximum value to their shareholders and achieve quick expansion. Basically, firms can profitably take up the acquisition route for modifying the operational activities in a surviving business. This is keen a way to capture the new business opportunities without confronting the long gestation and set up; time period is another great reason behind the purchase of other corporations (Shim, & Siegel, 2000).

In order to secure an instant improvement of its competence and capacity in the requested area of functioning, most of firms decide to purchase other corporations. So; that it will enable to provide more innovative services to their stockholders in satisfying their growing demands. Besides that, firms purchase other corporations because they want to enjoy instantaneous access to the market, brand recognition, goodwill and limited competition, utilize under utilized market power, displace existing management, etc.

Accordingly, they are not paying too much for the acquired corporation because in turn, it furnishes many profits to the acquired firm in different ways i.e. arouse the problem of slow growth and profitability in one's own industry. Despite of this, it also effectively assists in utilizing under utilized resources such as physical and human resources, so that it enables in attaining the highest operational efficiency and synergy. Basically, it is good investment option, so as to speed up and retain a ...