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Mergers and acquisitions - Coursework Example

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Mergers and acquisitions

Case examples about the impacts of government regulation of mergers and acquisitions will be drawn from USA, Europe and China. The paper is specifically concerned with analysing current issues pertaining to government regulation of mergers and acquisitions in China in comparison to the other developed countries. According to Jackson & Schuler (2000), in a merger, the two firms are supposedly on equal footing after they have been merged where one new company will continue to exist while in an acquisition, it is clear that one firm will take control of the other’s resources. There are various reasons why firms embark on mergers and acquisitions and these include the following: the need to increase their market share, increase their geographic reach as well as responding to new deregulation. In most cases, one major objective of a merger or acquisition is to gain skills and talents of people employed by another company. Therefore, it would be imperative for both parties involved to have a sound understanding of the concept of mergers and acquisitions and no one company should yield more power over another since this would imply easy takeover of another company’s assets and resources. A good deal should be in actual fact beneficial to both parties involved. However, of concern is that these businesses do not operate in a vacuum but in different environments that are characterised by different policies. The advent of globalisation has seen a significant rise in cross border mergers and acquisitions where the large multinational corporations seek to gain a strategic position and competitive advantage in the global market (Zhao 2008). However, this state of affairs can be advantageous to the multinational corporations as they will be able to attain their goal of making profits but it will pose challenges of supervision of these mergers and acquisitions by the host government (Zhao 2008). From this assertion, it can be noted that regulation is somehow important so as to prevent monopolies whereby the dominant multinational corporations can end up reaping huge profits at the expense of the welfare of the general citizens of the host country. Thus, regulation can be defined as “action formed and carried out by government, and it is the normal rule or special action that directly interferes with market allocation mechanism and indirectly change the decision-making of the enterprise and consumer,” (Spulber N.D. as cited in Zhao 2008). As going to be explained below, it is important for the host country to regulate as well as supervise the activities of the investors. Regulation is important as it serves as a measure to prevent the emergence of low efficient competition especially in horizontal mergers (Zhao 2008). In some instances, multinational corporations can merge with the powerful competition in the host country with the aim of controlling the market of the host country. This is not advocated as it destroys competition in the host country whereby the multinational corporations can end up reaping huge monopoly profits at the expense of the citizens of the host country. Competition will become inefficient and this will be against the intention of the host country to promote growth of the economy through equitable means. The main purpose of granting permission to mergers and acquisitions to operate in host countries is to stimulate economic growth, the reason why it is important f ...Show more

Summary

How does government regulation affect the success or failure of mergers and acquisitions? There are many factors that determine the success or failure of mergers and acquisitions hence, it is important for everyone involved in this process to have a clear understanding of how it works…
Author : hector33
Mergers and acquisitions essay example
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