MERGERS AND ACQUISTIONS

Abstract

Motives for mergers are various, ranging from ones based on classic assumption of profit maximization to managers' self-interests and exogenous factors. It is assumed that mergers usually occur for a combination of reasons. Even so, it is worth pointing out that some factors have a greater impact on a certain type of mergers. Similarly, there are a number of reasons for frequent failure of mergers to create values for shareholders, especially, of acquiring firms. Companies who want to engage in a merger or acquisition should plan their steps carefully. First of all, they should try to find the best suitable target company. They should calculate the possible resulting synergies and risks. Furthermore, the acquiring company should calculate the highest possible premium to be paid. With the help of the different valuation methods, it should valuate the company worth. Finally, the acquirer should pay attention to the criteria mentioned in this paper and avoid the mentioned deadly sins as well as follow the suggested best practices.