A history of boom in this trend is shown in these comments, “They skyrocketed in the1990s reaching a pick in 2000 with the booming stock markets and the larger degree of financial liberalization worldwide, declined sharply in 2001 and 2002 and rebounded again with new developments in the world economy after 2003.” [Coeurdacier, DE Santis & Aviat, 2009]
In case of merger two firms are combined and one firm is formed from them and acquirer assumes all the assets and liabilities of the target company. A merger may be friendly, hostile, strategic or financial; some other popular types of mergers are horizontal merger, vertical merger, congeneric merger, conglomerate merger.
An acquisition which is also known as “takeover” or “buyout” is takeover of any firm by another firm by purchase of its assets or common stock. Like merger an acquisition may also be friendly or hostile.
Before deciding any merger or acquisition companies evaluate it completely to check whether it should be pursued or not as it is quoted “Before going for any merger or acquisition, both the companies calculate the costs of mergers and acquisitions to find out the viability and profitability of the deal.”[mapsofindia] In order to evaluate the mentioned viability and profitability companies use different sort of valuation models and techniques, some of these methods are listed below.
One of the major benefits of Cross border mergers and acquisitions is that they allow firms to diversify their country risks as by expanding in foreign country, decreases firms overall performance’s sensitivity to its country risk. Moreover mergers also result in diversification of business risk.
Some other benefits resulted from mergers and acquisitions include synergy, economies of scale, fund raising, tax benefits, defense against takeover, ownership liquidity, reducing competition and access to proprietary and new products or services.
The factor of