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Introduction
Merger is a tool used by companies for the purpose of expanding their operations often aiming at an increase of their long term profitability. Mergers and acquisitions are almost a daily occurrence in the life sciences. Competition is fierce, and companies must team up to survive in an industry where specialized knowledge is king. One of the largest, most critical, and most difficult parts of a business merger is the successful integration of the enterprise networks of the merger partners. The prime objective of a firm is to grow profitably. The growth can be achieved either through the process of introducing or developing new products or by expanding or enlarging the capacity of existing products. This wave was driven by globalization, liberalization and technological changes.
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Capacity
Capacity refers to the amount of output that a firm is capable of producing given its existing assets. Acquiring another business might enable it to be able to increase its capacity relatively quickly.
Economies of Scale
Economies of scale are the advantage of large scale production that result in lower cost per unit produced.
Tax reasons
Businesses are always looking for ways to reduce their tax exposure. A firm has large sums of money lying idle, using these sums to acquire another business that would not only enhance its operations but would also reduce its tax liability www.final-yearproject.com |
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Size Issues
A mismatch in the size between acquirer and target has been found to lead to poor acquisition performance. Many acquisitions fail either because of 'acquisition indigestion' through buying too big targets or failed to give the smaller acquisitions the time and attention it required
Lack of Research
Acquisition requires gathering a lot of data and information and analyzing it. It requires extensive research. A carelessly carried out research about the acquisition causes the destruction of acquirer's wealth
Diversification
Very few firms have the ability to successfully manage the diversified businesses. Unrelated diversification has been associated with lower financial performance, lower capital productivity and a higher degree of www.final-yearproject.com | variance in performance. www.finalyearthesis.com
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Reliance Industries in March 2009 approved a scheme of amalgamation of its subsidiary Reliance Petroleum with the parent company. The all-share merger deal between the two Mukesh Ambani group firms was valued at about Rs 8,500 crore ($1.68 billion). This makes it India's 11th largest Mergers and Acquisitions transaction till date.
Conclusion
From the above discussion, we concluded that the mergers and acquisitions have emerged as a positive tool for the growth of the Banking sector as well as for the companies also. Business firms now have to face increased competition not only from firms within the country but also from international business giants thanks to globalization, liberalization, technological changes, etc. Making the mergers work successfully is not that easy as here we are not only just putting the two organizations together but also integrating people of two organizations with different cultures, attitudes and mindsets. While making the merger deals, it is necessary not only to make analysis of the financial aspects of the acquiring firm but also the cultural and people issues of both the concerns for proper post-acquisition integration
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