U4 DB4 Corporate Acquisitions - 36754

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Hersheys74

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Request Description

Research corporate acquisitions using your text, course materials, and Web resources and then answer the following questions:

  • Why do firms purchase other corporations?
  • Do firms pay too much for the acquired corporation?
  • Why do so many acquisitions result in shareholder losses?
Solution Description

A corporate acquisition is defined as the process of a larger firm purchasing another, usually a smaller firm, in order to build on the strengths and fulfill the weaknesses of the acquiring business. This process consists of purchasing the assets and operations and discarding the ‘extra’ which consists of overlapping positions and responsibilities.

Acquisitions take place for multiple reasons, including, but not limited to:

  • Establishing a higher valued company
  • Cost efficient company