Mergers and Adquisitions

Jorge Borrego

Finance 325 Week 5

Mergers and Acquisitions Paper

Instructor: John Carroll

The University of Phoenix

August 27, 2007

Mergers and Acquisitions

The impact of mergers and acquisitions on business has seen a change on the way mergers were conducted in prior years before legislators put a stop on some companies that were merging due to change in the economy, technology and for a change of management of the firm. The reasons business are acquiring other companies are for dubious and sensible reasons that can be beneficial for share holders, but not only that, there is strong belief among corporate management that and an acquisition or a merger is going to yield a great amount of revenue and be better competitors against other firms. The benefits from Mergers and Acquisitions can be complimentary to each other, since Mergers… are categorized as horizontal merger, vertical merger, and as a conglomerate merger …( Braeley, 2004).

A successful merger can achieve the take over of another firm by the means of purchasing another firm to combine assets and form a new firm. When an acquisition occurs, the new owners take over the owner ship and the company management. By merging companies the savings can be substantially in the matters of combining common assets and eliminating jobs positions that have similar functions to save cash. This way the firms combine strength to produce more units and lower the cost of producing.

If the merger succeeds, investors can be rewarded with bigger returns on their investment, on the other hand if the acquisition or merger did not work out for both companies, owners and management have an option to … de-merge ownership from the acquiring firms and try to spin off the company to keep the firms strengths in which a firm either sells part of its operations to another company or spins it off as an independent firm.. . (Braeley, 2004).

When two firms in the same line of business merge together is know as horizontal merger, the example of Sprint merger with Nextel created synergy that by combining operations and resources the two firms are worth more together than being apart … The Dynamics with the Sprint Nextel merger… would be its operating profile

as a national carrier of wireless and global IP provider….according to the author in the article, this merger is a solid opportunity for both firms… to bundle multiple services and the capability to provide roaming services with other wireless carriers … (Wildstrom, 2005). The other two types of sensible reasons are a vertical merger that involves … companies at different stages of production. The buyer expands back toward the source of raw materials or forward in the direction of the ultimate consumer and a

Conglomerate merger involves companies in unrelated lines of business… (Braeley, 2004).

Now days in some states, companies have limited protection against leveraged takeovers. The shareholders protect their rights with plan defenses known as the poison pill, and