Seminar paper from the year 2015 in the subject Business economics - Investment and Finance, grade: 1,0, Edinburgh Napier University, language: English, abstract: The purpose of a company's growth by merger and acquisition (M&A), rather than organic growth, is manifold. Common theories suggest the main reasons to be for instance greater market share or managers' interest for status and power. However, empirical studies show that most business combinations fail to create shareholder value. What encourages companies,like Pfizer or Google, to invest billions of Dollars in M&A, when empirical results are so discouraging?
This essay gives a brief introduction on the terminology of M&A, followed by seven core objectives (market power, economies of scale, synergy effects, diversification, the incorporation of transaction costs, value discrepancy and managerial utility), and finally examines the extent to which these objectives are achieved in practice.
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ISBN-13
978-3-668-43568-1 (9783668435681)
Schweitzer Klassifikation
Table of content
1. Introduction
2. M&A fundamentals
3. Motives for M&A
3.1 Market power
3.2 Economies of scale
3.3 Synergy effects
3.4 Diversification
3.5 Incorporate transaction cost
3.6 Value discrepancy
3.7 Managerial utility
4. Application to business environment
4.1 Google's acquisition of Motorola
4.2 Pfizer's acquisition of Allergan
5. Conclusion
