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Mergers and acquisitions - Essay Example
Finance & Accounting
Pages 12 (3012 words)
The objective of this paper is to analyze the concept of mergers and acquisitions through a case study, examine the common factors and motives of going for an acquisition and analyze the concept of merger waves and the result of the same on stock market. …
The paper affirms that there are many theories and motives that have given us useful reasons why mergers and acquisitions that take place. Williamson proposed the concept of transaction cost economics (TCE) through which an organization can find out ways of optimizing its activities so that the production and transaction costs are minimized. He proposed that it is generally cheaper to buy a generic product from an outsider which is having its core competency in the same area. However, firms might be interested in internalizing the above exchange. Therefore, firms might want to acquire other organizations. Another parallel theory that is often cited is the theory of resource dependence. It is proposed that organization exchange resources within their environment which include suppliers or competitors. Theorists claim that organizations go for acquisitions to take control over critical resources in order to decrease its dependence on outside. Mergers and acquisitions lead to organizations having access to critical resources thereby increasing their market power. Another motive in organizations going for mergers and acquisitions is the drive for organizations to acquire knowledge. Firms acquire or merge with other companies in order to take advantage of opportunities in organizational learning. This theory is based on the increasing importance of knowledge in achieving competitive advantage. Mergers are a preferred more of acquiring specific technical skills and capabilities that are difficult to buy. ...
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