Mergers and Acquisitions

Essay # 102311

Business > Companies
Business > Finance, Investment and Banking
Business > Management

This paper explores the issue of mergers and acquisitions as related to Berkshire Hathaway in terms of financial strategy, corporate governance and ethical issues.

1,430 words () | 4 sources | APA | 2005 United States

Paper Summary:

This paper explains that firms like the holding company Berkshire Hathaway often seek to acquire other companies rather than build a separate business from the ground up. The author points out that mergers and acquisitions are concerned primarily with long-term growth because the process of acquiring another firm is often capital intensive. The paper relates that other reasons for acquisitions are a desire for synergistic effects, increased revenue or market share, cross selling, economies of scale and tax benefits. The paper relates that, by acquiring significant portions of companies from varying industries, the holding company Berkshire Hathaway has become one of the largest firms in the country, the most expensive security on the New York Stock Exchange and one of the largest conglomerates in the history of business.

Table of Contents:
Acquisitions
Financial Strategy
Corporate Governance and Ethical Issues
Financial Situation Prior to Acquisition
Financial Situation after Acquisition
Successful or Not
Conclusion

From the Paper:

"When one firm is acquired by another, there are some predictable short-term effects on the acquiring firm's stock price. Though not always true, typically the acquiring firm's stock price will fall; whereas the target company's stock price will rise. An explanation for the acquirer's drop in stock price is the fact that a premium is usually paid for the target firm's stock. Without a premium above the market rate, there is little incentive for shareholders to part with their holdings. The same reason applies to why the stock price of the target firm increases--a premium is being offered."

Sample of Sources Used:

Berkshire Hathaway (2007). Form 10-Q, for the quarterly period ended March 31, 2007. United States Securities and Exchange Commission.
Brealey, R.A., Myers, S.C., & Marcus, A.J. (2007). Fundamentals of Corporate Finance (5th ed.). New York: McGraw-Hill Irwin
Buffett, W.E. (2006). Code of Business Conduct and Ethics. Berkshire Hathaway, Inc.
Krantz, M.K. (2006, October 24). Berkshire Hathaway Stock Hits $100,000. USA Today. Retrieved 13 March, 2008, from http://www.usatoday.com/money/markets/us/2006-10-24-berkshire-usat_x.htm