Mergers

9 Pages 2191 Words

e structure retains its original identity. An acquisition is a little different from a merger in that it involves many problems being "dissolved", and an entirely new company being formed. There are different ways for a merger or acquisition to take place. One obvious method involves the purchasing business making an absolute payment in cash or in company stock. Other arrangements may be made such as the exchange of bonds. After the purchase has been made, the purchaser acquires the assets and liabilities of the other firm. There are two main types of mergers; horizontal and vertical. A horizontal merger or acquisition combines firms that competed with one another at the same stage of production into a single new firm. These mergers usually involve basic commodities. A vertical merger, which is more common in producer-goods industries, takes the entire production process, from raw materials to the end finished product, and combines them together under single ownership. Throughout history, certain mergers and acquisitions have influenced modern international finance. In the late 1800's, merger and acquisition techniques were being abused and monopolies were starting to emerge. This led to the creation of The Sherman Antitrust Act, which made monopolies illegal. More recently, large mergers and the birth of new markets around the globe have affected international finance. When two major corporations merge they form a company with a very large amount of economical and political power. This has led to issues that deal with ethics and social responsibility (Hirsch 15). Now we contemplate the first important question: Why merge or acquire? As stated earlier, the overall goal is to ensure future stability and growth in the market. But more specifically, each company has individual goals that it hopes to achieve. Many times mergers are completed to save a failing business. Others reasons for mergers include reduced competition and/or product di...