Market Analysis
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Mergers and Acquisitions Paper
Mergers, Acquisitions, And Corporate Restructuring FIN/444
Introduction
When considering a merger there are many different factors that can lead to the success or failure of the deal. There are always the valuations and the projections to consider to determine whether the merger will create value or not. However, in addition to these estimations it is important to keep in mind the factors which can have a significant effect on the final outcome of the merger. These factors are broadly grouped as accounting factors, taxes, and legal factors. If there is a problem with the merger in one of these areas it could derail a merger that otherwise would have been successful, while if there is smart handling of these factors they can be a opportunity to the merging firms.
Accounting Factors
Even if a merger is believed to create a significant synergy and add value for shareholders, smart management must ensure that the combination of the two firm’s accounting will work. One way in which firms can benefit from a merger is through cost reduction. This cost reduction can come in the form of staff reductions or economies of scale or additionally increased access to technology to name a few. “Staff reductions - As every employee knows, mergers tend to mean job losses. Consider all the money saved from reducing the number of staff members from accounting, marketing and other departments. Job cuts will also include the former CEO, who typically leaves with a compensation package.” (Investopedia.com, 2008). Additionally, problems instead of benefits can occur from the merger of two companies from this factor. When post merger firms are trying to establish their synergy they may become too focused on the cost cutting measures and not enough on revenue enhancement. “The study concludes that companies often focus too intently on cutting costs following mergers, while revenues, and ultimately, profits, suffer. Merging companies can...
Mergers, Acquisitions, And Corporate Restructuring FIN/444
Introduction
When considering a merger there are many different factors that can lead to the success or failure of the deal. There are always the valuations and the projections to consider to determine whether the merger will create value or not. However, in addition to these estimations it is important to keep in mind the factors which can have a significant effect on the final outcome of the merger. These factors are broadly grouped as accounting factors, taxes, and legal factors. If there is a problem with the merger in one of these areas it could derail a merger that otherwise would have been successful, while if there is smart handling of these factors they can be a opportunity to the merging firms.
Accounting Factors
Even if a merger is believed to create a significant synergy and add value for shareholders, smart management must ensure that the combination of the two firm’s accounting will work. One way in which firms can benefit from a merger is through cost reduction. This cost reduction can come in the form of staff reductions or economies of scale or additionally increased access to technology to name a few. “Staff reductions - As every employee knows, mergers tend to mean job losses. Consider all the money saved from reducing the number of staff members from accounting, marketing and other departments. Job cuts will also include the former CEO, who typically leaves with a compensation package.” (Investopedia.com, 2008). Additionally, problems instead of benefits can occur from the merger of two companies from this factor. When post merger firms are trying to establish their synergy they may become too focused on the cost cutting measures and not enough on revenue enhancement. “The study concludes that companies often focus too intently on cutting costs following mergers, while revenues, and ultimately, profits, suffer. Merging companies can...