Mergers and Acquisitions History Essay Example | Topics and Well Written Essays - 750 words

Mergers and Acquisitions History - Essay Example This paper seeks to explore mergers and acquisitions as well as their inherent benefits and drawbacks. These business practices will also be examined in the context of foreign interaction. There are some sensible reasons for executing mergers and acquisitions (M&As). The most obvious reason is profitability. "Deals can be worth hundreds of millions, or even billions, of dollars. They can dictate the fortunes of the companies involved for years to come. For a CEO, leading an M&A can represent the highlight of a whole career" (http://www.investopedia.com/university/mergers/, 2007). Another sensible reason is the gain of power by way of absorption. Absorption involves the securing of a competitor's resources which, in turn, increases the absorbing company's clout and influence. The final reason, for purposes of this analysis, is for companies to gain more appeal in the international market. If foreign investors can be persuaded to contribute to a particular company, that company's economic success can be significantly enhanced. There are also some dubious reasons that come with the M&A game. One major obstacle is the time factor. The process of securing M&As can take considerable time to complete. Negotiations may fall through and/or companies may not be willing to engage in tedious legal wrangling. Another dubious reason is the inadequate protection from the law. Depending upon the state in which the companies operate, the law may or may not fully protect either one in terms of unfair business practices or hostile takeovers. Cash transactions are one way to effectuate a merger or acquisition. In these types of transactions, a company can seize some or all of another company's assets. This can be beneficial in that tangible property can be assimilated into a company's operation. However, "a cash purchase will be a taxable merger, whereas a stock exchange will not be taxable. In a taxable merger, there are capital gains effects and asset write-up effects to consider" (highered.mcgraw-hill.com, 2007). Stock transactions are another way to effectuate a merger or acquisition. In these types of transactions, the interest of shareholders comes in to play. In stock transactions, shareholders still retain their interest; it just gets transferred to the absorbing company. One glowing, positive benefit of these transactions is the tax consideration. "Certain exchanges of stock are considered tax-free reorganizations, which permit the owners of one company to exchange their shares for the stock of the acquirer without paying taxes" (www.referenceforbusiness.com, 2007). The major disadvantage of this arrangement is that there is usually no transfer of tangible assets which, in turn, will not yield a transfer of title. When merging with or acquiring an organization in another country, there are some risks that must be strongly considered. Arguably, the most significant risk encompasses this consideration: "A short history of precedent M&A activity and minimal financial disclosure pose various valuation issues; this is often compounded by unrealistic valuation expectations on the part of vendors" (www.ey.com, 2007). Companies that are interested in immersing themselves in foreign markets must thoroughly research economic trends and general business practices. Another serious risk is the

Starting Up A Business Essay Example | Topics and Well Written Essays - 1500 words

Starting Up A Business - Essay Example In the current business world, many regulations have been put to ensure that good business practices are maintained. According to Sarbanes Oxley (SOX) (2004), such regulations include the Sarbanes-Oxley Act that was enacted to enhance corporate transparency that would reduce cases of fraud and corruption. Therefore conforming to these regulations will help the business to be more accountable for its actions and financial statements being more reliable. The business will gain public confidence if such regulations are complied with.However, the cost of conforming to these regulations may be a challenge to the business since it will be very costly. For example, conforming to the Sarbanes-Oxley Act will enhance transparency in the business and hence the public will have confidence in it. This may not be felt immediately and therefore the business will enjoy the benefits after some time, say three to five years. These regulations also have an effect on decision-making. This is because, fo r every decision made, it has to match the standards of the regulatory framework hindering the flexibility in decision-making. This paper has concluded that starting up a business venture may be a challenging task considering the formalities involved, finding a source of capital and conforming to the regulations in the business environment. Starting up a business involves many activities but also operating the business is another task that if not well coordinated, may lead to the low performance of the business.