Benefits Behind Mergers And Acquisitions Economics Essay

Benefits Behind Mergers And Acquisitions Economics Essay This assignment is going to include a discussion of the theoretical benefits behind mergers and acquisitions, a review of the empirical evidence and also two real world examples, one where value was created and one where it was destroyed. Theory The benefits of mergers and acquisitions stem from a concept known as synergy which can be illustrated using a formula, PVab =PVa + PVb + gains (Arnold, 2008: 866) also represented as, 2+2=5. The theory behind this is that a combined unit would be greater in value than the sum of its parts, basically meaning two firms together are worth more than the value of the firms if they were apart. One benefit of this is the increase in market power which is a firms ability to exercise a degree of control over the price of a product. This can be achieved in more than one way but for example if a firm merged with another and then found itself in a monopoly position it would have the ability to push up the price of its products because consumers would have fewer alternative suppliers. Another advantage is the increase in economies of scale achievable. In most cases the larger the size of a firm the lower the cost per unit of output because of cost advantages being better exploited. For example i f two firms in the same industry merged they could gain marketing economies of scale through joint advertising perhaps and also administration economies by sharing administrative activities and accounting. There would also be financial economies as funds borrowed on the capital market would be provided at lower costs and with more favourable rates of borrowing. Internalisation of transactions is also a benefit; if two firms at different stages of the production chain merged, a greater efficiency of co-ordination of the different levels may be the outcome. This could be achieved because of reductions in costs such as communication, monitoring, contract enforcement and bargaining. Usually entering in to a new market or industry takes years of effort and during the early period losses may even be incurred, however through the process of mergers and acquisitions this once daunting task can become much easier. By acquiring an existing firm that already posses the required skills and mark et strength it eliminates the need for them to be generated internally. There are also tax advantages of acquisitions in some countries because losses of subsidiaries can be used to offset present taxable profits of the parent company meaning a lower tax bill. Therefore acquiring firms which have accumulated tax losses may be beneficial; however this benefit is not present in the UK due to much stricter rules being in place. Another benefit of mergers and acquisitions would be risk diversification. A firm may be viewed as less volatile if its cash flows come from a wider range of sources meaning shareholders gain from a reduction in risk but with no decrease in return. The greater stability of earnings may also be appealing to lenders which could result in lower interest rates. Mergers and acquisitions are usually used as an instrument to create shareholder value (Sudarsanam 2003), this is the main objective; however there also seem to be managerial motives present. When a firm acquires another is consequently becomes a larger enterprise meaning managers have more responsibility and so may be justified to receive a much larger salary. Some may feel more successful and important because of this and this sense of achievement may become a personal driver for managers to carry out mergers and acquisitions. Another reason could be survival, the management team may begin to feel the best way to avoid being taken over or dominated is to grow themselves, especially if regular mergers are occurring in the industry the firm operates in. This could lead to firms not merging for just the benefit of shareholders but also to try and assure the survival of the management team. A question one may wish to ask is how the value of the benefits of mergers and acquisitions can be measured? The benefits of acquisitions are usually not easy or straightforward to put in to numerical form. For example the application of superior managerial skills or entry in to a new market cannot accurately be measured; even things such as competitive position and reputation with customers, the list goes on. These items will not be found on balance sheets so therefore the true value of a firm may not be presented; however one indicator which could perhaps value the benefit may be the firms share price. Empirical evidence Although the theory behind mergers and acquisitions suggest that they create value for both the shareholders of the offeror and offeree companies the empirical evidence doesnt always seem to support this. (Meeks 1977) conducted a statistical test to represent the effects of mergers, he took profits from the merged companies after the merger and compared them with the weighted average of the participants profits had they not merged based on their earnings prior to the merger. His conclusion was that merged profits were less than those that the participants would have received had they not joined forces. However some have questioned Meeks research There are weaknesses in Meekss work (Ulen, 1980: 234). This being said Alan Gregorys review of the long run performance of UK acquiring firms reached a similar conclusion the long-run shareholder wealth effects of recent acquisitions in the UK have been, on average, significantly negative (Gregory, 1997: 984). However a study to evaluate take overs in the UK from 1955-1985 suggest that both offeror and offeree company shareholders gain from mergers we find that mergers have, on average, been value-creating for shareholders as measured by equity market prices around the merger announcement date. Shareholders of targets gain, and bidder shareholders gain or do not lose. (Franks and Harris, 1989: 247). Empirical evidence of the overall wealth gains of target shareholders from stock mergers were reviewed by (Loughran and Vijh 1997). They found that target shareholders that sold out soon after the acquisition date gain from all acquisitions; however those who held on to the acquirers stock find their gains diminish over time. Studies on post merger performance of acquiring firms seem to generally forecast negative results as can be seen here We find that stockholders of the acquiring firms suffer a statistically significant wealth loss of about 10% over the five years following the merger completion. (Agrawal, Jaffe Mandelke r 1992: 1618) and also here We find that these takeovers have a positive but not always significant impact on profitability, and a negative impact on short and long run returns (Cosh, guest and Hughes 2005: 489). Real world examples In 2006 Disney bought Pixar for $7.4billion. The two companies had been working together prior to the merger but with two different sets of shareholders there were barriers that existed, however with the merger the two companies became able to collaborate freely and with ease. Pixar has doubled its yearly film output something that would have been unthinkable before the merger and with expert advice from Disney has improved vastly in fields such as advertising and merchandising. Pixar  movies tend to perform better than animated movies developed by Disney itself (Garrahan, 2010: 16), Toy Story 3 is on course to become the biggest grossing animated film ever released by Walt Disney after generating $630.2m in its first month in cinemas (Garrahan, 2010: 16). In 1994 BMW acquired Rover for  £800 million. Only six years later and after millions of pounds worth of investment they sold the company, The brand had declined too far to be rescued. The German group ploughed {XEU} 4bn into its English patient before getting out in 2000. (The financial times, 2005) The company was sold to the phoenix four for  £10! Who  bought Rover  from  BMW for [pounds sterling] 10 (Eaglesham Peel, 2008: 5). This was a huge disaster, some blamed it on communication When  BMW bought  the  Rover  business, communication with the German managers was even worse (exacerbated by political infighting on the German side). Failure was the inevitable and bitter result. (Lester, 2007: 8) and others on the fact that Rover may have been a lost cause to begin with Even the mighty  BMW, which  bought Rover  in 1994, had to accept in the end that the brand had declined too far or at least to give it a future would cost far too much money. (The financia l times, 2005) Conclusion To conclude having researched for example Meeks and Gregorys financial analysis of the empirical evidence and reviewing the real world examples discussed above one may argue that mergers and acquisitions on average may not be beneficial to the shareholders of the acquiring firms. Management tends to underestimate the level of organisation required and therefore take off more than they can chew. However as seen in the Disney-Pixar case mergers can benefit both the offeror and offeree at times. Wordcount: 1492

Criminal Court Visit Essay Essay

Abstract The purpose of this paper is to highlight the different aspect of the Criminal Justice after visiting the criminal justice office(s). The visit is done during the last week of September 2010 and the visiting point was the United States District First Court of Appeal, the court located at 301 S. ML King Blvd. Tallahassee, Florida. In this paper the findings will be discussed that what factors (selected) are involved that affect the process of administration of justice. It will be tried the best to explain the observations and views with comparison and contrast. However, the points will be discussed in narrative format to grab the information precisely. The Criminal Court Visit and the Observations First, have some information about the Criminal Justice. The Criminal Justice is the system or group of system and institutions that have the prime responsibility to mitigate the crime or crime rate and to take necessary actions to cope with the situations that is critical and sensitive in nature to maintain the peaceful environment of the society. It is ideal profession for those who has investigative mind. The President’s Commission defined the criminal justice system as the means for society to â€Å"enforce the standards of conduct necessary to protect individuals and the community†. (The Challenge of Crime in a Free Society, 1967) The Criminal Justice system has three main parts: Police, Courts and Jails also known as Corrections but all these parts have one main goal that is to maintain the rule of law within the society by operating with coordination under one umbrella that is Law. Police Police is the front face of the criminal justice system that has the prime responsibility to maintain the peace and control the law and order situation as per their jurisdictions according to the predefined law. Police are also responsible to decrease the Crime rate in the society. In USA the police department was founded in 1908. Police itself has multidimensional activities to guarantee the peace, calm and trust throughout the society. Courts Courts are the place where disputes are settled down and finalized after thorough debates and analyses according to the law. There are number of professionals in any court who perform their responsibilities as per their role like judge, prosecutor and attorney usually belong to defense. The one most important personality in that court sitting is the judge that has a special authority to settle the dispute. Corrections or punishment Corrections or punishment is the outcome for the final decision of the court against the crime. The main purpose to keep the person in jail or prison is separate him from the society to prevent any further sensitive or law and order situation. There are also other different forms of punishment and corrections like to impose financial penalties, probation and house arrest. The house arrest sanction is the type of punishment that limits the person’s mobility to prevent others and society from his or her negative activities. Reflections with compare and contrast after Visiting Visiting the Criminal court, enable us to enhance our knowledge about the proceeding that is the part and parcel of administration of the justice. In that connection, the book â€Å"criminal justice today† by Frank Schmallegar provided the necessary information. The observation was based on the ongoing court trial on the violent attacks on two blameless citizens. (The identities will not be shown, because of personal reason/request). According to the case the victims Mr. A and Mr. O were driving on the way, during the driving there Car rammed from the back. When they got out checking that issue and cause of rammed, suddenly they were harmed by the gang that comprises with four people who had iron rods in their hands. The accused person got into his car and dragged the Mr. A along the road for a distance of 40 to 50 yards. However, the victim rushed to the near hospital but he died because of numerous rib fractures, the liver’s trauma and haemorrhaging, followed by a num ber of heart attacks. After and during the hearing of this tragic and inhuman story there was a pin-drop silence inside the court. The lawyer of the accused tried to defend by saying that the above mentioned story about crime scene was far from reality but the judge refused it when the criminal history is cited by the victim’s lawyer that  the accused criminal already has the record of murder trial that was started in six month before, he also referred the criminal’s girlfriend who declared herself as a hostile witness. The victim’s lawyer also presented the Toxicological reports that have the clear evidences of identical sweat, fiber and finger prints matches. When these evidences presented, the criminal’s lawyer had no way but to accept and keep silence, after examining the report and evidences the Judge started to express his remarks by saying that â€Å"Quite Shocking†. He further said that Mr. A and Mr. O was the respective and law-abiding c itizens and has no any criminal records, who were rammed and assaulted by the accused person and his gang in a highly violent and inhuman manner. Judge further said that the criminal also has a record of previous hearing but he didn’t learn any lesson from them. Judge further added that this action is reprehensible morally and this crime is very high in the ranking of manslaughter. Finally, the judge sentenced the 10 years among the final year suspended for the manslaughter. This court visit and the proceeding of above mentioned case opened many dimension in front of me. This visit enriched my experience about the criminal court and its proceeding about the particular case, the way that both parties argued and raised the concerns and the deep thinking ability of the judge who gave final judgment. Furthermore, there are plenty of issues that need to be addressed but another important point that is noticed generally about the Proceeding, is the media coverage. The main concern that is raised by the court officials is about the live camera coverage, according to them the camera coverage create a tension to make a reasonable judgment because during the whole process the officials feel confused to express their views thoroughly because of the mass reactions. The official concerned that the mass reaction is not the main issue but to satisfy them on each and every legal issues because of the ignorance of law and proceeding of the justice. They claimed that this camera coverage and its related issue converted the courtroom and its proceeding into â€Å"media circus. But the counter argument that is in favor of camera coverage is that, these camera coverage is the catalyst to make the whole proceeding crystal clear as per law and the assurance that the all proceeding that affect the administration of justice is bias less. This live camera coverage is the  antidote for those elements who affect directly or in directly to the whole processing and are the main cause(s) of dissatisfaction about any particular aspect or whole of the proceedings However, the positive point is that some professionals are in favor to do these activities during the proceeding, as per their viewpoint the live coverage via electronic media and devices make the proceeding of the administration of justice more trustable, accessible and transparent among the masses.

Of Mice and Men Argumentative Essay - 1115 Words

Essay Prompt: John Steinbeck’s novel, Of Mice and Men, has a controversial history. It has been repeatedly banned by school boards. Why might this book have been banned? Is such an action justified? In a five-paragraph essay, take a position for or against banning this novel. Use your three body paragraphs to develop each of three reasons for or against banning the novel. The Lost Portion of Human Society Right from the beginning of human civilization, books had become the vital flame that ignited many great achievements. John Steinbeck, one of the greatest writers in the American history who won the 1962 Nobel Prize, understood the desperate need of reading of the migrant workers, so he wrote Of Mice and Men in 1937 with the†¦show more content†¦Finally yet importantly, freedom to read is one of the reasons that oppose banning Of Mice and Men. According to the first Amendment, the government shall not intervene or prohibit the freedom of speech and press (Cornell University Law School). Long ago, the Founding Fathers had cherished freedom of humankind and they composed the Constitution to protect Americans’ freedom. Liberty has followed the United States for centuries and helps leaders develop a stable political system. Hence, authorities have no rights to restrict what citizens should and should not read (American Library Association ). One can draw conclusions based on what they read, but that person may never prevent others from reading that information. One can warn others about the impacts of information, but that person should respect the right to read of others. If authorities decide what Americans may or may not read, the United States will become a dystopia, where citizens have no freedom except to comply to the leaders. 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Case Critique Black Fly Beverage Company Inc( Richard...

Case Critique: BLACK FLY BEVERAGE COMPANY INC Black fly is enjoying a comfortable growth, their product has been well received by consumers and they have also benefited from positive feedback from the media. Now would then be a very good time to undertake an expansion as the company would take advantage of the momentum and exposure it currently has to introduce new products or features to the market. Let’s evaluate the different options available to Black fly. First Alternative: Launching a new Flavour: Launching a new flavour of an existing product has been the most common expansion initiative taken by companies in the food and beverage industry. It is a conservative approach as it usually does no require a significant†¦show more content†¦The LCBO is then the best resource a company can use when it comes to product/industry feasibility as it carries out a stringent assessment of quality, price and market potential for each new product. Therefore there is an opportunity and a market potential for this new product since the LCBO is willing to provide shelf space for the Spiked Ice, furthermore it has a provided a firm commitment for a 4 months order. The â€Å"Spiked Ice† also has the potential â€Å"real† additional revenues since it is a different product and can also target consumers who are not typically fond of vodka coolers (i.e. consumers that prefer drinking beer but whom during the summer month would quench their thirst on a freezee with a vodka twist) Allowing the company to increase and diversify its customer base. This initiative however does require a significant capital investment to upgrade the production facilities and the company would be facing a significant loss should the product not generate enough sales however the company has commitment from LCBO for a large quantity which will also help them boost the roll out of the new product. Also from a managerial/organizational perspective the company has proven that it is capable of successfully undertaking similar projects. I would recommend the company to launch the â€Å"Spiked