M&a Analysis Paper

M&A Analysis Paper

FIN 444: Merger, Acquisitions and Corporation Restructuring

University of Phoenix

November 8, 2010

M&A Analysis Paper

Merger & Acquisition is an important part of the corporate finance. It is combining of two or more entities into one through a purchase acquisition but it is different from consolidation (Dounis, 2008). The process of merger & acquisition includes various strategies that are extremely important in order to derive the maximum benefit from merger and acquisition deal. Some of the factors such as accounting, taxation, and legal factor affect the merger and acquisition strategy in different ways.

Relevance of accounting effects in Merge & Acquisition Strategy

Accounting is an important factor that has relevance in pursuing merger and acquisition strategy. It is because; the main aim of merger and acquisition is to get the financial gain and benefits. Some of accounting effects such as revenue enhancement, cost reduction, and risk management are important in merger and acquisition. Relevance of these effects in pursuing mergers and acquisitions are as follow –

Revenue Enhancement:

Revenue enhancement is a gain or benefit from the merger and acquisition in terms of increasing the revenues of a firm through market gain, increase in market power, and strategic benefits. It has important relevance in pursuing merger and acquisition strategy as the main aim of a firm is to increase its revenues by acquiring or merged with another firm (Hunt, 2009). Nevertheless, every firm that pursues merger and acquisition strategy considers the revenue enhancement factor.

Risk Management:

Risk Management is important and relevant in pursuing the strategy of merger and acquisition. The success or failure of merger and acquisition also depends upon the effective risk management within the businesses. Higher failure rate of merger and acquisition strategies indicates that organizations underestimate the importance of...