Why do firms purchase other corporations

 

 

Many corporate acquisitions result in losses to the acquiring firms’ stockholders. A coworker has asked you to explain what a firm would gain from purchasing another corporation. Explain to the coworker the fundamentals of corporate acquisitions.

 

• Research corporate acquisitions using your text, course materials, and Web resources and then answer the following questions:
  • Why do firms purchase other corporations?
  • Do firms pay too much for the acquired corporation?
  • Why do so many acquisitions result in shareholder losses?

• Make sure to go beyond the basics on explaining items such as to grow or expand a business. There are other instances in which M & A’s are suitable.

   

  Additionally, make sure not to ignore the topic of shareholder loss. Shareholders are found to often lose in these transactions and the expectation is not for you to identify this but to explain why it may occur