The Use Of MergersTo Increase Shareholder Value Essay Example

horizontal merger breaches antitrust laws. Nevertheless, economists and the government recognize that the public may benefit from horizontal mergers. Despite antitrust regulations' dominance, multiple factors can obstruct both vertical and horizontal integration.

Vertical and horizontal integrations each have their own potential drawbacks that could cause a company to reconsider their decision. In a vertical merger, questions about the transfer of property rights and accounting costs may create hesitation. Meanwhile, in a horizontal merger, concerns arise regarding market concentration and the already-established dominance of the rival company. Despite these complications, the benefits of integration often outweigh the downsides. To better understand this, examples are necessary. One crucial factor in the success or failure of any merger is the preservation of the acquired company's personal image, which can be achieved by retaining its management and workers. Some companies make the mistake of replacing this team, but doing so is a significant determinant of whether or not the merger will succeed.

Examples from the successes of vertical mergers in Dell Computer and the music industry demonstrate how supplier control and promotional support can help companies succeed in the market. However, the failure of the network television industry's vertical merger illustrates how mergers can stifle innovation. Meanwhile, the beer industry and drug companies' horizontal mergers highlight how cutting costs, seizing opportunities, and timing can bolster a merger's bottom line. Conversely, the failure of the Chrysler and Daimler horizontal merger showcases how a lack of vision, planning, and cultural sensitivity can lead to lost identity and a lack of cohesion between the two companies. An executive considering a horizontal or vertical merger would benefit from studying these examples when developing a merger

plan that meets the needs of their shareholders.

Here, an introduction to the study background on international finance highlights how globalization has been the driving force behind changes in the field in recent decades. This shift has lead to an increase in mergers between foreign and domestic companies, with a particular focus on overseas transactions. Additionally, the decline of Communist nations and OPEC's reduced power, coupled with the growth of capital flows, new financial instruments and the spread of financial institutions, have all contributed to an expanding environment for corporations. (Solomon, 1999, p.)

139) The various criteria in play have led to a trend of ever-expanding business models. Mergers, acquisitions, and integration are popular methods for companies to grow rapidly and inexpensively. Essentially, all three refer to combining assets or entities with the aim of increasing efficiency and shareholder value. As explained by the Columbia Encyclopedia, a merger involves "the consolidation of two or more corporations into one, where all property is transferred to the new corporation and the old ones cease to exist".

According to "Merger" (2007, p. 31585), while it is true that a merger involves a combination of two corporations, it encompasses more than this basic occurrence. A merger has the ability to unite various types of entities, such as solely merging assets or management from another company.

To comprehend the combination of two companies, it's crucial to grasp the complexities of mergers. There is no single definition that covers all aspects as each one is distinct depending on the participating companies. Although vertical and horizontal mergers differ in assets and management planning necessities, comprehending company distinctions is necessary for both types to attain

desired outcomes.

("Merger," 2007, p.31585) To merge with another company, a corporation must select the merger type and determine the optimal approach to fund integration. The primary objective of any business decision should be to improve shareholder value by boosting the company's total value.

The importance of analyzing various financing options and their potential advantages and disadvantages in regards to mergers is emphasized in "A Beneficial Merger; XM-Sirius" (2007, p.A21). The company's benefits and the impact on competition and the public should be taken into account. The study aims to address these challenges during both the integration process and beyond.

The study aims to examine the benefits and drawbacks of horizontal and vertical mergers, assessing their respective achievements and setbacks in order to identify the factors that influence their outcomes. Additionally, recommendations will be provided on how to make an informed decision regarding pursuing a specific type of merger. To achieve this objective, three secondary research goals have been established: evaluating financial strategies including stock buy-outs/transfers, leveraged buy-outs, and stock options; introducing theories relevant to horizontal and vertical mergers (Objective #1).

The aim of this study is threefold. Initially, it aims to examine how horizontal and vertical mergers are perceived and utilized within a corporate environment. Secondly, it aims to propose a set of organized standards for determining the appropriate type of merger to pursue and its financing options based on the company's financial and market status. Lastly, in order to achieve these objectives, Breadth, Depth, and Application components will be employed.

The Breadth component will be utilized for Objective #1, the Depth component for Objective #2, and the Application component to exhibit Objective #3. The importance and purpose

of this study is to comprehend the financial operations of corporations that aim to emerge as market leaders via integration and mergers, particularly following the Enron fiasco, the internet bubble, and various other bankruptcies that have devastated people's savings. The investigation of international and local financial procedures is necessary to determine the objectives that a corporation seeks to achieve. Enhanced knowledge is required by investors and businesses before committing to a significant transition such as merging with another entity.

The primary objective of this study is to emphasize the significance of careful consideration towards shareholder value when a company is contemplating the acquisition of assets from another company. It is essential to approach any substantial purchase with caution and meticulous planning. This is crucial because, as witnessed in the corporate scams of the late 1990s and early 2000s, executives endeavor to keep information concealed from shareholders at the expense of shareholder value. Educating both shareholders and executives can aid in decision-making. When executives initiate a proposal, shareholders can vote on it based on informed decisions. By examining vertical and horizontal mergers and analyzing advantages, disadvantages, failures, successes, financing, and legal issues, shareholders can determine their fate with a company. This contrasts the misinformation and concealments that were prevalent during the Enron period in corporate finance.