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Essay / Research Paper Abstract
This 5-page paper discusses whether a proposed merger between T-Mobile and Sprint Nextel will increase shareholder value for both companies. Bibliography lists 5 sources.
Page Count:
5 pages (~225 words per page)
File: AS43_MTspritmob.doc
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Unformatted sample text from the term paper:
twofold: To share networks (i.e., eliminate redundancies, thereby reducing costs) and to compete more effectively against Verizon Wireless and AT&T Mobility (Dignan, 2011). However, most analysts agree that such a
merger, in the short-term would be "incredibly messy" though long-term benefits might make it worthwhile (Dignan, 2011). Another question that remains unanswered throughout these Sprint-T-Mobile discussions, however, is whether the
merger will add value to shareholders of both companies. Its my contention that, based on research, mergers and acquisitions, in general, end up decreasing value for shareholders who have stakes
in both the target and acquiring companies. However, if both companies can stick it out over the long haul (sometimes years), shareholder value should rebound.
Examination of literature pertaining to mergers, acquisitions and shareholder value are pretty unanimous in one thing: Namely that mergers and acquisitions dont benefit shareholder value all that
much. Kursten (2008), for one, pointed out that mergers in the automobile industry (more specifically, that of Daimler Benz and Chrysler), didnt do
much for shareholders of either company. In fact, it ended up decreasing shareholder wealth for both companies (Kursten, 2008). Synergistic mergers, he goes on to say, have an "ambiguous effect"
on shareholder value, despite potential issues such as cost cutting, redundancy elimination and, in the case of T-Mobile and Sprint, network sharing. Srinivas
and Adavikolanu (2009) were somewhat more specific in their analysis of value creation when it comes to technology firm acquisitions. Their findings showed that acquiring companies tend to show a
net loss of shareholder value. The loss wasnt huge, but the authors pointed out that future studies would have to determine long-term effects of the acquiring companies post-merger.
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