Business environment Essay Example | Topics and Well Written Essays - 2250 words

Business environment - Essay Example Every other day in newspapers we see the news about spin off, takeovers, mergers and acquisition. For a successful development of a product or service, at some stage, it is essential to undergo mergers and acquisition. Many experts believe that mergers increase the efficiency and values of a firm and in this way, resources can be utilized in the best possible way, thereby increasing the overall value of shareholding. (The Basics of Merger and Acquisition, 2010) 1.1 What is a Merger? Merger is defined as amalgamation of two or more companies in order to form a single company where only one company survives and the amalgamated one lose their corporate existence. The company that intends to survives take overs all the assets and liabilities of those companies which have been merged. In merger, all the shareholding, assets and liabilities of one company is transferred to the company that has to survive in the form of: Debentures Equity share Cash Or mix of all of the above. (The Basics o f Merger and Acquisition, 2010) 1.2 What is Acquisition? In general, acquisition is defined as acquiring the ownership of a company. In the context of business, acquisition is a purchase of a company where the buyer purchases the shareholding, assets and liabilities of seller. ... Renovation of Product facilities Mergers and acquisition helps in intensively utilizing resources and plants, achieving economies of scales through expanding and efficiently utilizing production facilities. It also helps in after sales services and thereby improving customer satisfaction. iii. Market Expansion The most imperative advantage of merger and acquisition is that it helps in expanding the market and boosts growth of business. Mergers and acquisition helps in eliminating competition and offers new products and diversification strategies to the merged or acquired companies. iv. Financial Strength In history, many mergers and acquisitions have failed but in most of the cases, financial strength of companies after getting merged or acquired has increased. Mergers and acquisitions help in improving liquidity and provide access to the cash resources. Greater backing of assets is provided and gearing capability gets improved. By being merged or acquired, companies are in better po sition to avail tax benefits and the EPS (Earning Per Share) also gets improved. (Sobek, 2000) v. General Gains After merger and acquisition, a company gets in a position to improve its public image and it also attracts experienced managerial talents to look for its managerial affairs. M&As (Mergers and Acquisitions) help in offering better satisfaction to the users or consumers of its products. vi. Strategic Purpose The company which is going to acquire the other one looks for all the available alternatives including product expansion, market expansion, vertical expansion, horizontal expansion etc. Thus, the company sets it strategic purpose which