Acquisitions & Mergers Market
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Following a growth through acquisition strategy is not a new way for companies to increase their market presence. While open competition is one way for companies to gain market share and increase profit, eliminating competition through acquisition is a time-honored method for achieving the same goal. During the 1980s, mergers and acquisitions were characterized by companies "raiding" otherwise profitable organizations, then selling off the newly acquired company for ready cash. The result was an increase in profits to the acquiring company, but, in many cases, companies were unduly closed down, eliminating jobs and contributions to the economy. This research examines the mergers and acquisitions market, including past actions, current proposals, defenses that companies can mount to avoid hostile acquisition, and considers the outlook for this often misunderstood strategy.Mergers and acquisitions are a time-proven method for organizations to gain entry to markets, to increase their present market share, and to implement economies of scale. For some companies, mergers and acquisitions offer diversification of risk as the companies are able to enter markets where they did not previously compete and where the risks are different from the company's primary (core) business segments. In this way, larger companies can withstand shocks to one business segment which might pose critical problems to smaller competitors in that ind
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ffs, 1994, p. 7).
Changes in the 1990s
Merger and acquisition activity has surpassed the high level of transactions that were seen in the late 1980s, but there is a marked change in the type of transaction that is being conducted today. Where the 1980s were characterized by the hostile takeover and leveraged buyouts, the 1990s are characterized by friendly acquisitions with less use of borrowed funds. Third-party advising companies must themselves be sound financially and have gone through a period of consolidation themselves. In addition, these companies are being more creative in the way that equity financing is being structured, and many now profess a strong aversion to the casual leveraged buy-outs that used junk bond financing (although junk bonds are beginning to return in greater numbers to financial markets) (Grad, 1993, p. 29).
During the first six months of 1995, merger activity reached a record $164.4 billion; deals announced in July 1995 totaled more than $50 billion alone (Lipin, 1995, p. A1). These transactions are characterized by large mergers of companies that are seeking synergy, such as Disney and Capital Cities/ABC (a $19 billion friendly takeover of Capital Cities/ABC by Disney) and Chemical and Chase M
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Approximate Word count = 2625
Approximate Pages = 11 (250 words per page)
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