Acquistions and Mergers

An acquisition is the purchase of one  barter or beau monde by another company or other business entity. Consolidation occurs when two companies combine to take in a cutting enterprise altogether, and neither of the previous companies survive independently. Mergers argon standardized to acquisitions in the sense of two companies combining. However, mergers usually arise because neither company has the scale to acquire the other on its own. (Lynch, 2004) A very influential explanation for the existence of Mergers and Acquisitions (M& adenosine monophosphate;A) is the discharge Cash Flow theory in which managers have incentives to explicate beyond the firms optimal size (Jensen, 1986). For the airway sector, it is relevant to look at the cash flow levels form airlines performing many acquisitions. There is also evidence that shareholders ca-ca from M&A activity if market position lavatory be utilized. (Kim & Singal, 1993). Thus, a motive for M&A activity could be shareholders demand for firms to merge. Chatterjee (1986) considers mergers can be summarized into three major groups horizontal, plumb and related. Firstly, there are monetary motives, the idea that the combined companies can reduce the cost of capital by exploiting financial synergies.

Secondarily, increase a firms market power by controlling additional parts of the value chain, and thirdly entry by exploiting collusive synergies. Furthermore, Chatterjee (1986) states that two firms having collusive synergies will form the most value and obtaining financial synergy has the overhand on operational synergies. For the airlines sector, it would be interesting if those motives were to also play a role in the M&A activity. The relative importance of three major potential benefits of M&A?s by measuring value existence for stockholders as a result of M&A?s. Operative synergies, market power motives and financial motives are identified. originative efficiencies, tax savings and increasing market power are three major motives for... If you want to get a safe essay, order it on our website: Orderessay

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