Mergers and acquisitions

Mergers and acquisitions
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(January 27, 2012)
Mergers and acquisitions
The prime objective of any business is to make profit. And for the shareholders, they always seek to maximize their wealth. Business diversification occurs when firms seek to reduce risk by increasing their production capacity. A firm may opt to diversify through mergers and acquisition, which occurs when two or more firms join together to form a larger firm. The purpose of mergers is to enable the firm take the advantage of the economies of scale. Although diversification is a major boost to the stockholders, mergers may sometimes be disadvantageous as it may lead to efficiency reduction.
The inefficiencies are mostly caused by the cul...