Whenever a company acquires stake in another company,what will be the impact on the shareholders wealth.If the downward trend was already there, can this M&A help a company in arresting this trend,if yes,how?
The activity of Mergers and Acquisitions is indispensable so that there are players increasingly stronger, offering superior products and services, at lower prices.
One of the primary motives behind any strategic corporate decision is to maximise shareholder value.
The downtrend in companies share value may be due to stagnation of profits & market forces dont see any future growth prospects in company's value.
In such situation, if company acquires a business which has high growth potential then the management is seen as taking interest in utilising cash generated in investing growth area thereby increasing value of the company for share holders, which in turn can arrest downtrend in share value
There is a collection of free empirical papers on M&A below. Browse the thematical collections of free papers on corporate governance at our web-site https://www.virtusinterpress.org/A-set-of-updated-thematic-paper-collections-from-Virtus-Interpress.html to find more than 30 collections of more than 1200 free papers.
A merger or acquisition cannot be analyzed outside its strategic context. In other words, it is not just about A buying B, causing the stock price to rise or fall. Before the deal, the sector could be experiencing a severe crisis, just like the oil industry now, which means that some weaker groups will not survive. Thus, such operations represent an important strategic outlet for survival, remunerating the shareholder significantly higher than the eventual value of a bankruptcy.
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