Mergers are entered into mainly because of gaining of synergies.But there is no guarantee that every merger will be successful. I want to know the relationship between Value Creation and Mergers.
Merger or acquisition can give a new power to the company. So when a company merger or acquisition with other (s), each uniqueness combine in to complete the weaknesses. That will create a value creation.
You have plenty of good advice hete. As you see, the relationship is sadly negative in approx 2/3rds of the time. Acquisitions are extremely difficult to value and to integrate. The result is the acquired company and its top team tend to expropriate most of the value. Bankinh legal and other advisory fees can be substantial as well. The ntention of m&a is not always to create value but to change the industry and are but one way of doing this.
file:///C:/Users/sh/Downloads/Documents/Creating%20Value%20Through%20Mergers%20and%20Acquisitions-%20Challenges%20and%20O.pdf
https://www.researchgate.net/project/Book-Energy-investments-An-adaptive-approach-to-profiting-from-uncertainties
In my forthcoming book, I proposed that acquisitions are in reality acquiring real options on future returns under specified market conditions. The full option value may be evaluated through a single or multiple steps, where a combination of assets within a portfolio could yield a very different value to assessing the value of individual deals.
I have illustrated a number of examples where two assets that are stranded, hence of little value to the owners, when combined in two steps acquisitions converted the portfolio into something that is strategically valuable. By gaining scale, and interconnections to UK mainland, the two north sea gas fields were monetised. On their own, one had reserves but too small to commercialise to warrant an investment in pipelines. The other had pipelines but with a dwindling gas reserve. By interconnecting the two fields, and the acquirer's other fields in the area, the combined reserves gain for the acquirer the scale to be a relevant player.
Divestment on the other hand is a reversal of a prior commitment to develop and commercialise an asset or a business. This could be justified when market conditions change, or the strategic focus shift to other priorities. Thus, in the hands of other players, a marginal asset for the seller could be valuable for the buyer. The seller gets their cash (or proceeds from the sale) to reinvest or distribute to shareholders, while the buyer may open options for the portfolio.
Evaluated individually, these transactions may look "too expensive" for the buyer, or "too cheap" for the seller, depending on where the business cycle happens to be. Unfortunately, the portfolio effects are often missed out by literature because they are not amenable to being analysed using regression analysis or similar tools.
Creating value promotes the sell products and services to customers, while creating value for shareholders, in the form of increases in stock price, guarantees the future availability of investment capital to fund operations.Mergers and acquisitions (M&A) is a term that refers to the consolidation of companies or assets. A merger means a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed.
Value creation is all about delivering on customer promises by providing products/ services that meet or exceeds customers expectations. Mergers and acquisitions can improve value creation by combining capabilities and expertise of different organisations to produce better products/ services. It can also be seen as a way to achieve vertical integration to be able to provide a bundled solutions to customers as a one stop shop.
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