Mergers and Acquisitions - 96672

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Mergers and Acquisitions


Mergers and Acquisitions: - Assuming rationality from all players, mergers and acquisitions deals originate out of specific strategic corporate requirements. In reality, the advisors (both legal & financial) and middlemen also play a significant role in the original activity. Acquirers / targets may focus on competitors for a potential acquisition/sell off. Buying competitor implies horizontal integration. There are lot of risks (financial as well as operational) involved and challenges in mergers and acquisitions face by company which is acquiring and target companies as which are listed below:-

  • Synergies sometimes do not generate real cash flows as expected.
  • Financial Risk arises from the amount of debt (taken to acquire other corporation) in a company’s capital structure. Impact of changing debt on valuation
  • Increase in debt increases value through increase in interest tax yield
  • Interest Tax shield gain is partially offset by increase in cost of equity
  • There are complex processes involved in mergers and acquisition .It is difficult to compare betas measured against different indices due to differences in composition of index.
  • Changing financial leverage affects the systematic risk that shareholder’s face.
  • Risks when the acquirer and the Acquirer-Target merging entities are in two different countries

For the corporation that has acquired another company, merged with another company, or been acquired by another company, evaluate the strategy that led to the merger or acquisition to determine whether or not this merger or acquisition was a wise choice. (Facebook acquiring WhatsApp)


There are many reasons that a company consider before doing any merging or acquisition activity. Hence it can be safely considered that Facebook too has considered the factors related to the same.

First of all, the number of users of WhatsApp is around 450 million. WhatsApp was initially released in the year of 2009. In the span of just over 4 years having over 450 m