Essay About Larger Firm And Larger Market Share

Merger And Acquisition
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In the world of growing economy and globalization, major
companies on both domestic and international markets struggle
to achieve the optimum market share possible. Every day
business people from top to lower management work to achieve
a common goal – being the best at what you do, and getting
there as fast as possible. As companies work hard to beat
their competitors they assume various tactics to do so. Some
of their tactics may include competing in the market of their
core competence, thus, insuring that they have the optimal
knowledge and experience to have a fighting chance against
their rivals in the same business; hostile takeovers; or the
most popular way to achieve growth and dominance – mergers
and acquisitions.
Mergers and acquisitions are the most frequently used
methods of growth for companies in the twenty first century.
Mergers and acquisitions present a company with a potentially
larger market share and open it up to a more diversified
market. At times, a merger or an acquisition simply makes a
company larger, expands its staff and production, and gives
it more financial and other resources to be a stronger
competitor on the market.
To define this topic more clearly, let me state that a
corporate merger, as defined by the “Quick MBA” reference
website, is the combination of the assets and liabilities of
two firms to form a single business entity. In everyday
language, the term “acquisition” tends to be used when a
larger firm absorbs a smaller firm, and “merger” tends to be
used when the combination is portrayed to be between equals.
In case of a merger between two firms that are approximately
equal, there often is an exchange of stock in which one firm
issues new shares to the shareholders of the other firm at a
certain ratio. It has been customary that the firm whose
shares continue to exist, even if that occurs under an
alternate company name, is referred to as the acquiring firm
and the firm whose shares are being replaced by the acquiring
firm is usually called the target firm. You can refer to the
appendix of this thesis to find the formula for the premerger
stock price.
A merger is considered to be successful, if it increases
the acquiring firms value. Clearly, judging from the various
statistics charts found in the appendix, there is a
considerable amount of companies in the United States which
believe that a merger will increase their companys value.
An article which was recently published by the Federal
Trade Commission (FTC) noted that the United States is
heavily involved in the so called right “merger wave.” The
number of mergers reported rose from “1,529 in 1991 to a
record 3,702 in 1997 – a 142 percent jump.” During this
period, the FTC spent a great amount of time on
distinguishing and at times preventing mergers which were
potentially anticompetitive and directed at forming
monopolies. This is a great example of the strong controls
that the United States government has instituted, in order to
prevent companies from forming monopolies, so that our
financial markets will stay unpolluted and healthy
competition can continue to thrive. It also shows that the
topic of mergers is extremely controversial at times and
involves a great number of legal aspects in order for any
merger to become finalized.
Most mergers have actually been known to benefit both
competition and consumers by allowing firms to operate more