For instance, Vishny (2003) states that misvaluation effects play an important role in market approaches in the short as well as in the long run since they are often driven by managerial optimism whereby the managers intend to satisfy their immediate financial benefits and this often leads to failure in the long run. Reasons such as such as differences in accounting principles, misvaluation of stocks and managerial approaches have been observed to be the main causes of failure of mergers and acquisitions. In some cases, organisations may be undervalued or overvalued but the truth of the matter is that markets are not static as they can change at any moment. The research methodology has been based on secondary research which focused on the merger of Time Warner and AOL. The findings of the study show that this merger failed as a result managerial optimism whereby the CEOs of Time Warner and AOL used their overvalued stocks to merge their organisations. The managers assumed that their organisations will perform well in the future. Their assumptions were based on the notion that the trend will continue like that but that was not the case. Indeed, the internet Bubble that was so promising in the beginning but the trend later changed due to different market forces. It has been observed
It can be concluded that the study has been designed to explore the impact and influence of misvaluation in the failure of mergers and acquisitions. The main aim of the research has been to establish the role of misvaluation in the failure of mergers and acquisitions…
orporate strategy. The dealing occurs in the form of selling, buying and merging of two or more companies. This deal in turn helps the developing company to grow at a faster pace within the industry and even without establishing any separate entity. In general merger and acquisition are the two simple forms of expanding the business (Sherman, 2010, p.2-3).
The merged companies enter into a deal and forge ahead as a single entity. In mergers, stocks for both companies must be surrendered and a new company stock is put in place. The merging companies should often have nearly the same or equal valuation. Acquisition refers to an act where one company agrees to buy assets and liabilities of another through a signed deal.
These activities usually, are functions of long term corporate strategy, need for diversification or expansion or merely some legal contractual obligations. Similarly, on June 14, 2012, Johnson & Johnson closed its deal of acquisition of Synthes Inc., a Swiss manufacturer of medical equipment used in providing artificial support structure to damaged human body parts.
Merger and acquisition refers to mechanisms by which companies combine to promote their business interests to pursue a common market. A merger refers to the mechanisms by which a two or more companies consolidate their resources to form a new entity while acquisition refers to a situation where one company purchases another.
Merging business may be agreed or necessitated by the need of expansion, attracting new markets, gaining market share, improving productivity and/or combining the factors of production in each separate entity to achieve a positive growth as one entity. Depending with the financial, operational and the long-term goals of the merging firms, clauses are spelt out to benefit the involved firms in running the merged entity.
This paper talks about the business and the corporate level strategy of the American Airline Group., and the strategies in which the companies forming the American Airline Group used to merge. This paper also contains information about a possible company
al examinations between the sheets of the companies, emulated by formal transaction, a letter of expectation, due to tirelessness, a buy or merger understanding, lastly, the execution of the arrangement and the exchange of installment. One of the famous merges that have happened