An industry overview

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Mergers
Merger is a financial tool that is used for enhancing long-term profitability by expanding their operations. Mergers occur when the merging companies have their mutual consent as different from acquisitions, which can take the form of a hostile takeover.

The business laws in US vary across states and hence the companies have limited options to protect themselves from hostile takeovers. One way a company can protect itself from hostile takeovers is by planning shareholders rights, which is alternatively known as - poison pill. If we trace back to history, it is observed that very few mergers have actually added to the share value of the acquiring company. Corporate mergers may promote monopolistic practices by reducing costs, taxes etc.

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An industry overview

  1. 1. Merger is a financial tool that is used for enhancinglong-term profitability by expanding their operations.Mergers occur when the merging companies have theirmutual consent as different from acquisitions, which cantake the form of a hostile takeover.The business laws in US vary across states and hencethe companies have limited options to protect themselvesfrom hostile takeovers. One way a company can protectitself from hostile takeovers is by planning shareholdersrights, which is alternatively known as - poison pill. Ifwe trace back to history, it is observed that very fewmergers have actually added to the share value of theacquiring company. Corporate mergers may promotemonopolistic practices by reducing costs, taxes etc.
  2. 2. Such activities may go against public welfare. Hencemergers are regulated d supervised by the government,for instance, in US any merger requireds the priorapproval of the Federal Trade Commission and theDepartment of Justice. In US regulation son mergersbegan with the Sherman Actvertical, conglomerate orMergers may be horizontal, in 1890.congeneric, depending on the nature of the mergingcompanies.Acquisitions or takeovers occur between the bidding andthe target company. There may be either hostile orfriendly takeovers. Reverse takeover occurs when thetarget firm is larger than the bidding firm. In thecourse of acquisitions the bidder may purchase the shareor the assets of the target company.

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