what is the impact of mergers and aquisitions on business, including SENible and dubious reasons for benefits

Question

for benefits and cost of cash ans stock transactions, financial risks of merging with or aquiring an organization in another country.

Answer 1

I assume you are doing a basic Business course and would like an overview ...

When a Business achieves good profitability and a decent market share it can become more cost effective to buy-out, take-over or merge with a competitor in the same field rather than attempt to take customers away from them 'one at a time'.

In addition to 'eliminating'; the competition (and thus reducing pressure for price reductions) costs can often be saved in the 'back office' functions after the merger (no need for 2 sets of payroll, finance, order processing, warehouse, HR etc etc).

However there is always the risk that the 'assets' of the target have been over-priced leading to too higher a price being paid. Of course if the 'buy-out' has been done using paper (shares) rather than cash, this risk is eliminated.

For examples consider Vodafone's use of shares V Marconi's use of cash to buy up 'assets' at the height of the dot.com boom - and the impact this had on the Company when the 'assets' turned out to be almost worthless during the dot.com bust.