Mergers and Acquisitions Student’s ID: Dated: MERGERS AND ACQUISITIONS Introduction In recent years, economies around the globe have been facing frequent mergers, alliances and acquisitions due to rapidly changing needs of customers and markets…
Johnson & Johnson, on the other hand, is one of the biggest names in the health care industry, serving customers around the globe with its baby care products, medical devices, medicines, body nutrition and other day to day consumer products (Jnj.com, 2013). The announcement by Johnson & Johnson had created waves in corporate world; firstly, this marked the biggest acquisition in this industry, and secondly it had multiple-fold effects disturbing many organizations within and outside the industry. Strategic Justification Johnson & Johnson was observed to be laying great emphasis on health care sector in recent years, and wanted to shift its focus from consumer products to healthcare products. Thus, in the words of CEO of Johnson & Johnson, acquisition of Synthes was all part of the big plan for Johnson & Johnson: becoming most wide-range orthopedics and neurologics business, serving customers worldwide in medical industry. This has enabled Johnson & Johnson to be the absolute provider of all related services in supply chain of orthopedics with a comprehensive coverage for all kinds of products and services. Synthes makes substantial profits in developing markets and third world nations. Therefore, the acquisition decision was in line with Johnson & Johnson’s long term strategy to promote well being of public, especially in underdeveloped and developing areas, through innovative and healthier products, putting the company in a stronger position than before. It also provided benefits of economies of scale, synergy and bulk buying to the group as they were engaged in similar businesses and therefore idle capacities and resources could now be better utilized, leading to efficient or full employment of factors of production and fall in unit costs as fixed costs were spread over larger number of units being produced (invertor.jnj.com, 2012). Regulatory implications When deciding on acquisition of Synthes, Johnson & Johnson had to consider all legal complications involved; one of them being prohibition of simultaneous holdings in Synthes and DePuy orthopedics subsidiary. Johnson & Johnson and Synthes have been direct competitors in certain sectors of medical equipment and surgical treatment goods and therefore, Federal Trade Commission intervened to protect public interests (reuters.com, 2012). Antitrust regulations governed by the European Union and U.S. regulators were required to be satisfied and complied with to make due diligence effective. Consequently, it had to divest its stakes from DePuy in order to be able to make acquisition of Synthes legally possible. It accepted offer from Biomet, a company involved in surgical products and instruments to sell the subsidiary for $280 million, receivable in cash (Nj.com, 2013). On part of Synthes, there were past accusations regarding one of its business units, Norian, of conducting trials to promote its product without permission of relevant authorities. The company ended up paying a penalty and damages to another company, amounting to $22 million. It agreed to dispose of its unit which committed offence previously at its acquisition date (Bloomberg, 2013). Apart from mentioned implications, it was very vital to account for the deferred taxation repercussions involved in due diligence activities, including consideration of accumulated tax losses and deferred tax assets that could be utilized for tax avoidance tactics. ...
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(Merger and Acquisition Essay Example | Topics and Well Written Essays - 2250 Words)
“Merger and Acquisition Essay Example | Topics and Well Written Essays - 2250 Words”, n.d. https://studentshare.net/finance-accounting/91753-merger-and-acquisition.
In the modern-day business world, many corporate organizations, private and public companies extensively implement strategies by which they buy, sell, divide and combine with one or more other business entities. The main reasons for which these businesses acquire or combine with others are that mergers and acquisitions allow businesses to support one another financially and managerially, thereby promoting rapid growth.
The study has also been based on two broad objectives namely: to identify the effect of misvaluation on mergers and acquisitions as well as to analyse the role of mergers and acquisitions in the competitive business environment. The literature reviewed showed that mergers and acquisitions do not guarantee success of a business due to several reasons.
Mergers and acquisitions (or M&As as they were colloquially known) were so profitable that many of the best firms on Wall Street had opened up their own M&A Divisions to take full advantage of this phenomenon. Mergers and acquisitions are corporate deals that have established their worth in the social and financial landscape.
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).
Merger and Acquisition have an intrinsic measure of mutual benefits to the participating parties as compared to partnerships. They might be cumbersome with respect to time and complexities of agreements but the business perspective in them is long term and beneficial.
These types of transactions happen very often in the finance sector. Firms purchase other firms for a number of reasons. Whatever reasons prompt a particular deal, M&A are thought to be successful when multiple synergies are achieved and when the business combination increases the net cash flow of the merged business more than what each firm could have achieved on its own.
Plans depend upon the existence of alternatives, and then decisions have to be made regarding what to do, how to do it, when to do it and by whom it is to be done. Organizations operate in rapidly changing environment, and for this reason it is impossible to stipulate minor details and predict all changes needed for strategy implementation.
tions related to merger and acquisition, the following discussion will consider evaluating the pros as well as the cons of a similar deal undertaken by Shire/NPS to analyse whether such a decision will serve beneficial for the shareholders of both companies.
In order to expand
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