Firms are aggressively engaging in merger and acquisitions as financial strategies in today's business world. Merger and acquisitions are a process discussed between two firms each seeking to benefit from the decision of marrying the two companies'. Factors to be considered when combining the firms are their financial benefits and operation efficiency from the transaction. The objective is to reduce the rate of risk to increase value on the firm, thus bringing a higher return to its shareholders. In addition, combining firms with opposite beneficial phases in the business cycle will reduce their inconsistent performance. This has been more evident with international firms.
As new countries have joined the global market force, there have been a substantial number of foreign companies penetrating the US industry. Most of these foreign firms have infiltrated the market using their influential power in the political and economic arena. Sony Corp. and Metro-Goldwyn-Mayer, (MGM) are two firms which consensually merged in early 2005.
Both are considered to be a conglomerate. They are highly compatible and recognized to have a strong hold in the motion picture industry; however, Sony has other units including electronic, and games. Sony is a foreign firm originated and based out of Tokyo while MGM was based in the US. Before Sony and MGM considered the acquisition they analyzed the pros and cons of merging, the factors considered in the price to be paid, the anticipated benefits, the fluctuation of their stock, and the combined capital structure. Once the acquisition was completed other factors were examined, such as the overall outcome of the deal, and the international financial management issues, if any.
Pros and Cons of Mergers and AcquisitionsIn order to make a well informed decision toward a merger or an acquisition, several factors must be taken into account, and possibilities...