Effective Financial Management

Chapter 10

Business Mergers and Valuation

A merger is one way we are able to enhance organizational sustainability by expanding operations. Mergers occur when the merging organizations have a mutual interest in joining forces. This is decidedly different from an acquisition, which is a predatory move by one organization on another and is often not welcome resulting in a hostile takeover. Which of these it is may be different in the minds of the parties to the transaction as depicted in Figure 10.1. Mergers and acquisitions of other companies are investment decisions and should be evaluated on essentially the same basis as, say, the purchase of new items of machinery. There are, however, two important differences between this type of activity ...