7. Obtain synergy benefits The primary motivation for most mergers is to increase the value of the combined enterprise. If companies A and B merge to form company C, and if C’s value exceeds that of A and B taken separately, then synergy is said to exist. Such a merger should be beneficial to both A’s and B’s stockholders. Synergistic effects can arise from four sources: (1) Operating economies, which result from economies of scale in management, marketing, production, or distribution. (2) Financial economies, including lower transactions costs and better coverage by security analysts. (3) Differential efficiency, which implies that the management of one firm is inefficient, and that the firm’s assets will be more productive after the merger, …show more content…
Horizontal Merger / Acquisition Horizontal Merger is a merger of two or more companies in which firms join or when a company takes over a company in the same industry, which means making similar goods and services. It is important to note that horizontal merger increases the opportunities for companies to increase specialization and efficiency. In this case, the company will be able to improve the results of the activities in all areas which will increase the profit. 2. Vertical Merger / Acquisition A vertical merger or acquisition involves firms at different steps of the production process or occurred between the companies that are interconnected, for example a tire company merged with a car …show more content…
All liabilities of each company will be shared. 2. Operating expenses will increase especially in short term as a result of the merger or acquisition activity 3. Cultural differences. Will require an adjustment of new system and procedures that will be applied after the company merged or acquired. This would require a relatively long time due to each company being familiar with the procedures and systems that already exist. Acquisition provides significant impact not only to the company’s internal environment, but also to the external environment. In general, acquisition has direct and indirect influence to the stakeholders, such as shareholders, employees, directors or management, suppliers, consumers, government, creditors, competitors, and the public. In the company’s internal condition, the success of this strategy will have a positive impact for the company, with the achievement of company’s objectives for example, the achievement of an increase in the financial aspect, managerial, marketing, and operational (Marzuki & Widyawati, 2013). 2.1.6 Stages of Merger and