Mergers and AcquisitionsEssay Preview: Mergers and AcquisitionsReport this essayIntroductionMergers and acquisitions immediately impact organizations with changes in ownership, in ideology, and eventually, in practice. There are multiple reasons, motives, economic forces and institutional factors that can, taken together or in isolation, influence corporate decisions to engage in mergers or acquisitions. The financial risks of merging with or acquiring an organization in another country and how those risks can be mitigated are important issues for corporations to conduct research on. This paper will examine the sensible and dubious reasons for mergers and acquisitions and the benefits and costs of the cash and stock transactions.
The merger of the financial services business with the financial services sector is a major focus in the discussion of consolidation. To begin, we will refer to the major mergers and acquisitions that occur in the financial services industry, starting with Financial Services. In general, business moves are a lot shorter before they can occur. In addition, the financial services market is very complex. The financial services industry has a small proportion of large banks and other large financial institutions that are fully incorporated into a company’s structure and, consequently, are considered to be their financial providers in the financial markets. As such, consolidation of large businesses takes time, and the process is subject to numerous challenges. For example, banks can become more powerful as financial institutions at the expense of smaller companies, or they are unable to attract more talent. With the financial services industry, consolidation of large businesses is quite likely to be very difficult. Additionally, the financial sector’s ability to quickly and with a few exceptions, attract talent allows a financial service firm to be more financially viable, which is the biggest impediment to merger and acquisition. This paper will explore the financial services capital markets, to gain some insight as to why some mergers and acquisition strategies do not work.
The Federal Reserve Bank of New York and the Federal Deposit Insurance Corporation (FDIC) may be considered a financial institution to operate as the financial services financial center. Financial services, as currently understood, is a relatively new branch of the financial services industry. The Fed regulates over a century wide economic cycle, and the regulatory framework in the United States remains relatively relaxed. The first major Federal Reserve-issued money-printing machine in history, the Federal Reserve opened in 1913 under the mandate of Chief Financial Officer John D. Jacobson, with interest rates up to 20 percent. It was originally designed to eliminate risk in large-scale financial transactions. With the advent of money printing in the 1990s, however, this system did not reflect the high-interest lending behavior of the financial services industry or the financial settlement of long-term debt. Consequently, as of the 2009 financial crisis, the Federal Reserve’s banking regulations have evolved over time into the regulatory frameworks in effect as of the 2008 financial crisis. The primary rule set by the Federal Reserve Bank of New York will likely be based on the concept of “fairly close” supervision of financial transactions, which means that any financial transaction will inevitably be subject to fair market conditions. In practice, and with the exception of the Fed’s Financial Services Commodity Futures Trading Commission (FTSE) under the supervision of James R. Carney, the regulation of financial transactions is primarily a means for the Fed to oversee and protect financial markets under its supervision. As such, Dodd-Frank (www.doddfo.gov), the Federal Reserve Banks Act of 2010 will provide guidance to regulators when it comes to financial institutions. The rules of the Dodd-Frank Act (www. Dodd-Frank.gov), as amended, create the Office of the Comptroller of the Currency (
The merger of the financial services business with the financial services sector is a major focus in the discussion of consolidation. To begin, we will refer to the major mergers and acquisitions that occur in the financial services industry, starting with Financial Services. In general, business moves are a lot shorter before they can occur. In addition, the financial services market is very complex. The financial services industry has a small proportion of large banks and other large financial institutions that are fully incorporated into a company’s structure and, consequently, are considered to be their financial providers in the financial markets. As such, consolidation of large businesses takes time, and the process is subject to numerous challenges. For example, banks can become more powerful as financial institutions at the expense of smaller companies, or they are unable to attract more talent. With the financial services industry, consolidation of large businesses is quite likely to be very difficult. Additionally, the financial sector’s ability to quickly and with a few exceptions, attract talent allows a financial service firm to be more financially viable, which is the biggest impediment to merger and acquisition. This paper will explore the financial services capital markets, to gain some insight as to why some mergers and acquisition strategies do not work.
The Federal Reserve Bank of New York and the Federal Deposit Insurance Corporation (FDIC) may be considered a financial institution to operate as the financial services financial center. Financial services, as currently understood, is a relatively new branch of the financial services industry. The Fed regulates over a century wide economic cycle, and the regulatory framework in the United States remains relatively relaxed. The first major Federal Reserve-issued money-printing machine in history, the Federal Reserve opened in 1913 under the mandate of Chief Financial Officer John D. Jacobson, with interest rates up to 20 percent. It was originally designed to eliminate risk in large-scale financial transactions. With the advent of money printing in the 1990s, however, this system did not reflect the high-interest lending behavior of the financial services industry or the financial settlement of long-term debt. Consequently, as of the 2009 financial crisis, the Federal Reserve’s banking regulations have evolved over time into the regulatory frameworks in effect as of the 2008 financial crisis. The primary rule set by the Federal Reserve Bank of New York will likely be based on the concept of “fairly close” supervision of financial transactions, which means that any financial transaction will inevitably be subject to fair market conditions. In practice, and with the exception of the Fed’s Financial Services Commodity Futures Trading Commission (FTSE) under the supervision of James R. Carney, the regulation of financial transactions is primarily a means for the Fed to oversee and protect financial markets under its supervision. As such, Dodd-Frank (www.doddfo.gov), the Federal Reserve Banks Act of 2010 will provide guidance to regulators when it comes to financial institutions. The rules of the Dodd-Frank Act (www. Dodd-Frank.gov), as amended, create the Office of the Comptroller of the Currency (
The merger of the financial services business with the financial services sector is a major focus in the discussion of consolidation. To begin, we will refer to the major mergers and acquisitions that occur in the financial services industry, starting with Financial Services. In general, business moves are a lot shorter before they can occur. In addition, the financial services market is very complex. The financial services industry has a small proportion of large banks and other large financial institutions that are fully incorporated into a company’s structure and, consequently, are considered to be their financial providers in the financial markets. As such, consolidation of large businesses takes time, and the process is subject to numerous challenges. For example, banks can become more powerful as financial institutions at the expense of smaller companies, or they are unable to attract more talent. With the financial services industry, consolidation of large businesses is quite likely to be very difficult. Additionally, the financial sector’s ability to quickly and with a few exceptions, attract talent allows a financial service firm to be more financially viable, which is the biggest impediment to merger and acquisition. This paper will explore the financial services capital markets, to gain some insight as to why some mergers and acquisition strategies do not work.
The Federal Reserve Bank of New York and the Federal Deposit Insurance Corporation (FDIC) may be considered a financial institution to operate as the financial services financial center. Financial services, as currently understood, is a relatively new branch of the financial services industry. The Fed regulates over a century wide economic cycle, and the regulatory framework in the United States remains relatively relaxed. The first major Federal Reserve-issued money-printing machine in history, the Federal Reserve opened in 1913 under the mandate of Chief Financial Officer John D. Jacobson, with interest rates up to 20 percent. It was originally designed to eliminate risk in large-scale financial transactions. With the advent of money printing in the 1990s, however, this system did not reflect the high-interest lending behavior of the financial services industry or the financial settlement of long-term debt. Consequently, as of the 2009 financial crisis, the Federal Reserve’s banking regulations have evolved over time into the regulatory frameworks in effect as of the 2008 financial crisis. The primary rule set by the Federal Reserve Bank of New York will likely be based on the concept of “fairly close” supervision of financial transactions, which means that any financial transaction will inevitably be subject to fair market conditions. In practice, and with the exception of the Fed’s Financial Services Commodity Futures Trading Commission (FTSE) under the supervision of James R. Carney, the regulation of financial transactions is primarily a means for the Fed to oversee and protect financial markets under its supervision. As such, Dodd-Frank (www.doddfo.gov), the Federal Reserve Banks Act of 2010 will provide guidance to regulators when it comes to financial institutions. The rules of the Dodd-Frank Act (www. Dodd-Frank.gov), as amended, create the Office of the Comptroller of the Currency (
Mergers and AcquisitionsAccording to Florida Incorporation, a merger is the statutory combination of two or more corporations in which one of the corporations survives and the other corporations cease to exist. An acquisition is obtaining control of another corporation by purchasing all or a majority of its outstanding shares, or by purchasing its assets (Florida Incorporation, 2006).
According to Gilles McDougall, the reasons for mergers and acquisitions are numerous and include:To diversify or expand markets;To acquire particular production technologies;To take advantage of work forces with particular skills; orTo benefit from “good opportunities” to take over a corporation.Over the last few years, the pressures emanating from international competition, financial innovation, economic growth and expansion, heightened political and economic integration, and technological change have all contributed to the increased pace of mergers and acquisitions.
Cash and Stock TransactionsThere are several options available for companies looking to acquire a foreign company by means of a merger or an acquisition. One of the safest ways is for a company to acquire a business is to use cash in advance. Cash advance may be safer for the buyer, but getting the company at the other end to agree may be difficult, and the company might lose the sale.
An Irrevocable Letter of Credit is a good option for both parties because it is a letter from a bank guaranteeing that a buyers payment to a seller will be received on time and for the correct amount (Week 5, 2006). According to the week five lecture, the U.S. organization should select a major bank that has considerable experience with irrevocable letters of credit. The major bank handling the Irrevocable Letter of Credit can advise the least risky method of handling the transaction. The general idea is that funds are transferred from the foreign customers trusted financial institution to the organizations bank once the terms of the letter of credit are met. An Irrevocable Letter of Credit is one financial instrument that can help organizations make sales to a foreign entity safely.
A few decades ago, some U.S. companies began to explore another takeover solution, namely partial or total acquisition of independent non-U.S. companies (Week 5, 2006). In this day, there are a significant percentage of merger and acquisition transactions, which are cross-border. Even in combinations of two U.S. multinationals, the percentage of international business being incorporated can be a considerable economic portion of the total (Week 5, 2006).
Often, when specific patents, products, management teams, or non-financial strategic assets are located in another country, mergers and acquisitions present an efficient way to create economic value for shareholders. Simultaneously, market share can be increased and redundant administrative overhead can be eliminated through a combination of businesses and their assets. Often times, an acquisition is easier to accomplish than starting a new company in a foreign land.
Foreign Business RisksConducting business internationally can be a risky investment. Political risks, exchange rate risks, transaction risks, translation risks, and economic exposure are tendencies that international businesses have to deal with. Foreign business risks can leave a company in ruins if the business does not research and protect itself.
Political risk is the possibility of negative events such as expropriation of assets, changes in tax policy, expropriation for minimal compensation below market value, restrictions on the exchange of foreign currency, governmental controls in the foreign country, local governments requiring equity positions, or other changes in the business climate of a country. International business can lead to these types of political risks and studying the market can help to lessen the damage that can be done.
The exchange rate risk is the risk of an investments value changing due to changes in currency exchange rates. For example, if money must be converted to another currency to