A Diagnosis On Hiccup Of Merger And Acquisition
Author: s.senthil srinivasan
A DIAGNOSIS ON HICCUP OF MERGER AND ACQUISITION
The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate strategy, corporate finance and management
dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given
industry grow rapidly without having to create another business entity.
Achieving acquisition success has proven to be very difficult; while various studies have showed that 50% of acquisitions were
unsuccessful the acquisition process is very complex, with many dimensions influencing its outcome.
â€¢ The buyer buys the shares, of the target company ownership control of the company conveys effective control over the assets of the
company, but since the company is acquired intact as a going business, this form of transaction carries with it all of the liabilities accrued
by that business over its past and all of the risks that company faces in its commercial environment.
â€¢ The buyer buys the assets of the target company and the sell-off is paid back to its shareholders by dividend or through liquidation.
This type of transaction leaves the target company as an empty shell, if the buyer "cherry-pick" the assets that it wants and leaves out the
assets and liabilities that it do not.
There are two types of mergers that are distinguished based on finance. Each has certain implications for the companies involved and
Purchase mergers is a kind of merger when one company purchases another. The purchase is made with cash or through the issue of
some kind of debt instrument; the sale is taxable.
Acquiring companies often prefer this type of merger because it can provide them with a tax benefit. Acquired assets can be written-up
to the actual purchase price, and the difference between the book value and the purchase price of the assets can depreciate annually,
reducing taxes payable by