Mergers and Acquisitions

Further, an increasing proportion of the acquisition and merger activity in the late1980s is of the leveraged buyout (LBO) variety. A leveraged buyout is one in which the cost of the purchase is largely borne by the firm being acquired. In most instances, these deals are structured to be financed by socalled junk bonds. Junk bond is the term used to describe an (1) original issue, (2) highyield, (3) lowgrade, (4) corporate bond (Weinstein, 1987, p. 76). In the context of high and lowgrade, this definition is generally applied so that the lowest ranked bond which would be included in the highgrade classification would be Moody's Baa (Weinstein, 1987, p. 76).

Statement of the Problem

Regardless of the strategic goals involved, merger and acquisition activity usually results in some degre

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Acquisition and Merger Activity Diversification has long been recognized as a desirable goal for investors (Robinson & Wrightsman, 1984, p. 106). Diversification is viewed as a viable means of reducing risk associated with investment (Brealey & Myers, 1986, p. 156). A cursory consideration of diversification attained through corporate acquisition and merger activity, therefore, would tend to lead one to a conclusion that such a result could only be beneficial for the corporate equity shareholder, and for the economy generally. A perusal of the matter, however, brings to light some findings and contentions which lead to less sanguine conclusions. In the contemporary period of historically high levels of acquisition and merger activity in the American Economy, it is desirable, therefore, to carefully examine the consequences of corporate diversification from the perspective of the corporate equity shareholder. In all instances of acquisition and merger, one corporation acquires the stock of another. The acquiring corporation then either retires the stock of the other corporation, and dissolves the acquired corporation, or permits the acquired firm to continue operating in its own name as a whollyowned
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Some common words found in the essay are:
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Approximate Word count = 1875
Approximate Pages = 8 (250 words per page)

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