Mergers and Acquisitions

Paper Summary:

This paper discusses mergers and acquisitions (M&A) and how they are financed. In particular, the paper looks at how they are financed through stock swaps, cash and stock, and leveraged buyouts as well as hostile takeovers. The Sears-Kmart merger is used as an illustrative example of M&A activity while risk mitigation is included as the conclusion of the document. Cross border M&A activity is considered the most risky form of M&A.

From the Paper:

"From one perspective they are viewed as an excellent way to achieve growth and market share without extensive resources dedicated to organically growing the enterprise, while on the other hand they can also be viewed as a competitive strategy to remove a market threat (Mastracchio & Zunitch, 2002). In any event, M&A has come to be associated with a specific category of corporate finance and management that involves either merging two companies into one or in an outright purchase of another company. In either case, M&A requires extensive due diligence that involves extreme examination of the each company's accounting records and financial reports in an effort to avoid any liability concerns following the M&A activity."

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