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Running head: FIN 600 ASSIGNMENT
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FIN 600 ASSIGMENT
Student’s Name
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FIN 600 ASSIGNMENT
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Mergers
Mergers and acquisitions are deemed an extremely complicated financial subject. This is
a kind of business alliance applied by firms either to diversify or to enlarge their businesses. A
basic merger and acquisition will hold a lot of complex issues in legal, tax and synergy (Donald,
2010). Mergers and acquisitions are the lifeline of any business apart from some businesses
where the government itself holds monopoly influences in which mergers do not occur and that
is the reason it is vital to understand both pros and cons of mergers and acquisitions. The aim of
this essay is to talk about the advantages and disadvantages of a merger.
Advantages of a merger
There are various advantages associated with mergers. One of the advantages of mergers
is that firms that have surplus cash and not adequate profitable openings within the business can
venture with that cash through merging or acquiring another firm which in turn would lead to
increased sales for combined firms and as well greater profits (Donald, 2010). In brief,
companies involved in mergers will be able to enjoy huge profits by investing any funds that are
lying idle. Moreover, such firms can be able to extend their business territories to attain greater
levels that they may not be able to attain with no mergers.
Another advantage of mergers is the aspect of diversification (Donald, 2010).
Diversification is a very significant aspect in businesses in the modern business world. If the firm
has merged or attained another business that belongs to a different industry, then the chances of a
decline in sales within one of the firms is made up for by another firm sales figure as likelihoods
of a decline in both businesses operating in diverse industries is very infrequent. Therefore,
mergers help in the diversification of businesses making firms very profitable.
FIN 600 ASSIGNMENT
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Moreover, another benefit of mergers is that if a firm is acquiring a business within the
same industry, then it is successfully decreasing the competition (Donald, 2010). If rivalry is
decreased then the firm in turn will incur fewer costs on advertisements and publicity and more
on research and development of items resulting in production of improved goods at reasonable
costs. As a result of improved goods, the businesses will experience increased sales hence
resulting in augmented sales as well as increased profits for the firms.
Disadvantages of mergers
There are various disadvantages linked with mergers. One of the leading disadvantages of
the mergers is the cost at which the deals occur since there is no homogenous or uniform means
in which one may establish the proper cost given that every firm is unique and diverse from
others. As a result, the calculation of the right price to merge becomes very complex and chances
of a business overpricing the merger deals are always there and given...
