Email One might legitimately question whether we have an international monetary 'system' at all, at least compared to Bretton Woods and the gold standard.
This rationale is particularly alluring to companies when times are tough. Strong companies will act to buy other companies to create a more competitive, cost-efficient company and, theoretically, more shareholder value.
Meanwhile, target companies will often agree to be purchased when they know they cannot survive alone. Distinction between Mergers and Acquisition The terms merger and acquisition mean slightly different things, though they are often used interchangeably.
When one company takes over another and clearly establishes itself as the new owner, the purchase is called an acquisition. In the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated.
This kind of action is more precisely referred to as a "merger of equals. For example, both Daimler-Benz and Chrysler ceased to exist when the two firms merged, and a new company, Daimler Chrysler, was created.
A purchase deal will also be called a merger when both CEOs agree that joining together is in the best interest of both of their companies.
But when the deal is unfriendly—that is, when the target company does not want to be purchased—it is always regarded as an acquisition. Whether a purchase is considered a merger or an acquisition really depends on whether the purchase is friendly or hostile and how it is announced.
In other words, the real difference lies in how the purchase is communicated to and received by the target company's board of directorsemployees and shareholders.
Synergy takes the form of revenue enhancement and cost savings. By merging, the companies hope to benefit from the following: 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. Whether it's purchasing stationery or a new corporate IT system, a bigger company placing the orders can save more on costs.
Mergers also translate into improved purchasing power to buy equipment or office supplies. When placing larger orders, companies have a greater ability to negotiate prices with their suppliers.
To stay competitive, companies need to stay on top of technological developments and their business applications. By buying a smaller company with unique technologies, a large company can maintain or develop a competitive edge. Improved market reach and visibility. Companies buy other companies to reach new markets and grow revenues and earnings.
A merger may expand two companies' marketing and distribution, giving them new sales opportunities. A merger can also improve a company's standing in the investment community: Achieving synergy is easier said than done. How will the combined entity actually go about achieving the synergies touted during the process?
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Once the transaction is finalized, critical decisions have to be made. Which operations will be kept or closed? How will you entice key employees to stay? Who will be accountable to see that these synergies are actually realized?Find helpful customer reviews and review ratings for Economics for the IB Diploma with CD-ROM at mtb15.com Read honest and unbiased product reviews from our users.
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