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Essay / Research Paper Abstract
This 3-page paper examines whether a merger has value for the acquiring company. The main thrust of the paper is that under certain circumstances, it does not. Bibliography list 4 sources.
Page Count:
3 pages (~225 words per page)
File: D0_MTmeracq.rtf
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Unformatted sample text from the term paper:
alliances, mergers and acquisitions meant that the acquiring company would definitely gain something of value, which was why management of the company went so far in the first place to
take over the target company. But now that the merger mania has, for the most part, subsided, the question arises - have acquiring companies actually obtained the right value for
the effort placed in the mergers and acquisitions? The answer, quite frankly, is a mixed bag. On the one hand, the acquiring
company certainly obtains the assets, receivables and other tangibles offered by the takeover company. But on a deeper level, there could be questions as to whether the value was actually
worth the effort. Part of the reason for all the questions is because todays managers are more grounded in reality than they
were in the 1980s and 1990s (Monroe, 1995). For one thing, more acquiring companies have realized the importance that cash flow has when it comes to valuing and evaluating business
assets (Monroe, 1995). Before the 1990s however, business acquisitions were primarily speculative in nature (Monroe, 1995). Another reason why this question arises
is because studies have shown that more than half the mergers that took place during the 1990s actually ended up diluting shareholder value within the firs year (Anonymous (b), 2003).
There seem to be a variety of reasons for this - mainly due diligence that isnt too thorough; non-involvement of top management in the due diligence process; ignorance of troubled
companies that seem fairly stable on the surface; lack of a solid integration plan - or even an integration team in place; and lack of a material-adverse-change clause in the
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