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Corporate Finance - Essay Example
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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…
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. ...