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). ...Show more