StudentShare solutions
Triangle menu

Corporate Finance - Essay Example

Not dowloaded yet
Premium quality

Extract of sample
Corporate Finance

In addition, environmental factors like macro economic conditions and cyclical behaviour of the industry may influence on their performance. The hubris hypotheses formulated by Roll, states that often company managers systematically commit error in evaluating merger opportunities which are due to their excessive self-confidence. So, managerial motives play important role in determining the outcome of the merger and acquisition. In contrast, in some instances even when shareholder wealth is destroyed, executives still seem to gain from mergers and acquisitions, which show that, managers through mergers and acquisition activities may seek to utilise their own utility at the expense of shareholders (Casper Flugt, 2009). Main objectives of merger Companies go for merger and acquisitions to expand their business. By the process they try to develop their companies’ brands. Aim to reduce market competition. Aim to cutting costs by laying off employees, removing management and other related actions. To reduce taxes they go for merger. Aim for ‘empire building’ by acquiring managers and other purposes, they may go for acquisition. It is a strategic move by companies to diversify their business away from their resources. Company managers think that joint company will be able to generate more value than the separate firms. There are many options for payment for a company when it goes for acquiring another firm. It can pay in fully cash, or it may buy targeted shares. It can also choose a combination of loan notes, share and equity, deferred payment. Actually, the payment method is important for several reasons. Payment by means of cash and debt will benefit more for a company than stock acquisitions, as it could be used more efficiently...
At the time of stock market boom, mergers were more appealing. On the other hand, falling share prices can lead to a company being undervalued, and make it an attractive for acquisition. Mergers and acquisitions can either be value destroyers or value creators that depend on factors like company’s cost of capital, its strategies and decisions and cash flows generated from the business operations The performance is not related to the nature of an industry, instead it was driven by the quality and strategy of management. Good strategy by management can produce good results, on the other hand, poor decision and strategies may end with poor performance.
In the present competitive market companies are looking for mergers and acquisitions to expand their business to a newer region. Most of the mergers and acquisitions resulted in value creation. Especially, in case of big companies it is true. There is some perception that nearly 50-70% of mergers fail to deliver shareholder value. In many occasions employees feel the pinch as the new group goes to cut jobs to reduce cost to the company. But, ultimately performance is not related to the nature of an industry, instead it was driven by the quality and strategy of management. Sound financial management along with other favourable factors is necessary for value creation, its survival and growth for any company. ...Show more

Summary

Mergers and acquisitions are playing an important role in shaping business activities all over the world, and are the main ways to achieve growth. In recent years we can see the boom in mergers and acquisitions across the world in almost all sectors. Mergers and acquisitions can either be value destroyers or value creators…
Author : lryan
Corporate Finance essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Corporate Finance"
with a personal 20% discount.
Grab the best paper

Related Essays

Corporate finance
.....Financial Times Advanced Corporate Finance Assignment Name Surname Educational Institution Introduction It was estimated that 55,000 acquisitions valued at $1.3 trillion were materialised in the 1980s. Due to globalisation, the merger and acquisition activities reached $3.44 trillion in 2010.
6 pages (1500 words) Essay
Corporate finance
Share price refers to the price of a single share that company issues for subscription. While taking decision on share subscription, an investor compares the share price with company’s financial statements.
6 pages (1500 words) Essay
CORPORATE FINANCE
However empirical evidence remains inconclusive. In financial theory, disagreement exists with respect to the effect of capital structure on firm value. The traditional view of corporate capital structure and valuation holds that there is an optimal capital structure and thus the total value of the firm can be increased through a judicious financing mix.
6 pages (1500 words) Essay
Corporate finance
The other notion that dividend decisions also affect the value of a listed company proceeds from thinking along similar lines. Unfortunately (or fortunately, depending on how one looks at it),
18 pages (4500 words) Essay
Corporate Finance
each gearing level; to determine the EPS for each level of gearing under a bad year or good year; to construct a graph where EBIT and EPS are the axes and , using the EBIT-EPS data that will be developed, plot the data on the graph and discuss the possible ranges where lower
10 pages (2500 words) Essay
Corporate Finance
The world is truly becoming more of a global village every day. We cannot be separated from what is happening all across the world, as recent events unfold right across our TV screens 24/7 courtesy of satellite TV and the plethora of channels that work
1 pages (250 words) Essay
Corporate finance
ort for the finance minister about development of standard corporate reporting regulations in the country and importance of standard corporate governance regulations as an important part of corporate reports published by the public companies. Therefore, this report will deal
8 pages (2000 words) Essay
Corporate finance
The depreciation for the following years is calculated in the same way until year 8 when depreciation assumes straight linear method. In this case, the final salvage after 12 years is insignificant and in this calculation it is
3 pages (750 words) Essay
Corporate Finance
It is a multinational corporation, based in United Kingdom (UK) and it is listed on London Stock Exchange (LSE) (Rexam Plc, 2014c). GSK is regarded as the world’s sixth largest pharmaceutical company, which is based in Brentford, London. The company
7 pages (1750 words) Essay
Corporate finance
Instead of this, the market worth of the company depends on its operating profits. Company’s capital structure is the means by which a company funds its assets. It can finance or fund its operations either
8 pages (2000 words) Essay
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation