StudentShare solutions
Triangle menu

Mergers and acquisitions as a response to the deregulation of the electric power industry - Essay Example

Nobody downloaded yet

Extract of sample
Mergers and acquisitions as a response to the deregulation of the electric power industry

Mergers and acquisitions are such modes of growth. Mergers occur when two firms of equal standing concur to combine their operations under one shareholder group; acquisition is when one firm outrightly purchases another and becomes its majority shareholder. As to whether they combine operations or not and the manner they choose to do so are a matter of strategic determination, but it does not detract from the fact of the merger or acquisition as a matter of ownership (Daniel & Metcalf, 2001, p. 216). This report examines the fundamental theories behind mergers and acquisitions and gives a cursory examine of one such undertaking.
Motives for firms to enter into mergers or acquisitions:
(1) To improve efficiencies by reducing production costs, increasing output, improving product quality, obtaining new technologies, or providing entirely new products. A merger or acquisition may explore both operating and managerial efficiencies. Operating efficiencies come from economies of scale, production and/or consumption economies of scope, enhanced resource allocation, shift to a less costly technology or asset configuration, or acquisition of better skills, use of grand name capital, and so forth (Pautler, 2003, p.122). (2) To explore financial and tax benefits by diversifying the firms’ earnings with dissimilar earnings streams to lessen earnings variation. Depending upon regulations, tax benefits may be realized, as in situations where the law allows offsetting the acquiring firm’s taxable income with the acquired firm’s net operating losses to reduce future taxes (Pautler, 2003, p. 122) (3) To increase market power to the advantage of the merging firms. Where the merging firms each command a significantly sizeable part of the market, then their merger may well trigger a spate of other mergers by the competing firms, which result in virtual monopolies or oligopolies. These so-called “merger waves” were evident in three periods: the successive mergers in the 1887-1904 wave which were viewed by George Stigler as “mergers for monopoly,” the 1916-1929 wave he called “mergers for oligopoly,” and the 1968-1974 wave which Matsusaka termed the “conglomerate merger wave” (Stigler, 1950, and Matsusaka, 1993, both cited in Pautler, 2003, p. 125). After the passage of the antimerger legislation in the U.S. in 1950, preventing the merger of competitors with significant market shares, such mergers were allowed only after review and approval by U.S. antitrust and other regulatory agencies. In the UK, a similar merger wave was seen between 1948 and 1961, when 735 public companies were taken over by other public companies, with two to three hundred other unsuccessful bids during the period, which Kuehn (1969) attributed to the effect of the valuation ratio as a constraint on the managerial utility function (p. 133). (4) Because of management greed, self-aggrandizement or hubris. A study conducted by Morck, Shleifer & Vishny (1990) showed that managerial incentives may account for merger activity that eventually erode the firm’s long-term value. Badly considered mergers may result in over-diversification, an ill-considered pursuit of growth, or merely bad acquisition decision. Oftentimes, the poor quality of the decision is not evident at the time it was made, and only becomes apparent afterwards. Matsusaka found that in the conglomerate merge ...Show more


The size of corporations and the complexity of their operations have transcended the power of nations and states that have created them; the matter of their growth and proliferation is therefore an important consideration in the formulation of national policies and the promulgation of laws…
Author : efay
Mergers and acquisitions as a response to the deregulation of the electric power industry essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Mergers and acquisitions as a response to the deregulation of the electric power industry"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Mergers and Acquisitions
It has been seen that the value created is high for the target firms present in advanced institutional and economic environments. The advanced economies refer to the countries that possess resources of high quality. Aulakh et al (2000) have shown the modus operandi of the domestic firms that take part in the international resources acquisition.
20 pages (5000 words) Essay
Mergers & Acquisitions
Since the past decade, the globalisation of the businesses across the globe has initiated a search for the competitive advantage, worldwide. With the increased competition to fetch the customer satisfaction in a cost effective way, the companies have responded to the pressure of attaining scale in a quickly consolidating global economy
10 pages (2500 words) Essay
Mergers and Acquisitions
It was absolutely surprising and unbelievable to the Europeans that an Indian entrepreneur was able to acquire one of the most prestigious steel firms in Europe. Globalization and liberalization has brought many opportunities and challenges to the business world.
12 pages (3000 words) Essay
Mergers and Acquisitions
Introduction In the last 5 decades there are more stances of cross border mergers and acquisitions than the number of lockouts and cases of bankruptcy. Although the number of cross border merger and acquisitions has increased manifold but the instances the number of cross border mergers and acquisitions has increased substantially.
6 pages (1500 words) Essay
Mergers and Acquisitions
Man has always tried to conquer the unconquerable and do the undo able this is the same factor that drives the companies into the abyss of the unknown (Allan and Michael, 2010). In a bid to outdo and outsmart the competitors and get the upper hand of strategic advantages, companies cannibalise other companies or in some cases form understanding relationship.
10 pages (2500 words) Essay
Mergers & Acquisitions
Most companies carry it out to improve their business fortunes. The terms mergers & acquisitions are generally used together or sometimes even interchangeably but there is a sight difference in the two terms. Acquisition takes place when one company becomes the owner of another company in a way that the company sold ceases to exist and the buyer company continues to trade its stock.
8 pages (2000 words) Essay
Mergers & Acquisitions
In a merger, the surviving firm acquires the assets and liabilities of the other firm(s). A relevant example here is the recent merger of HDFC Bank and Times Bank. After the merger, Times Bank will go out of existence and expanded HDFC Bank will continue to exist.
8 pages (2000 words) Essay
Mergers & Acquisitions
The current P/E ratio of the shares is 6.6 and the market price per share is 1.03. Since P/E ratio = market price per share/earnings per share (, if the P/E ratio is to be 8 without affecting the earnings from the share, the value of the
4 pages (1000 words) Essay
Mergers & Acquisitions
lly starts through a series of informal discussions among the board members of the companies, following with formal negotiations, letter regarding the objectives, goal towards the company, acquisition or merger agreement and finally, executing the deal and transferring the
15 pages (3750 words) Essay
Mergers& Acquisitions
Companies may also merge in order to overcome forces of competition by increasing economies of scale. Many companies have merged due to diverse reasons depending on their situations and market scenarios. This paper will discuss the merger that took place between the US airways
4 pages (1000 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Click to create a comment
Contact Us