Evidence, argumants and evaluation on whether mergres and acquisitions Essay

Evidence, argumants and evaluation on whether mergres and acquisitions incraese shareholders wealth - Essay Example The following sections of the paper discuss the effects of Mergers and acquisitions on the shareholders’ wealth. Mergers and acquisition have led to the increase of shareholders market presence in certain industries according to Brigham and Houston (2009). This has also led to effective sales and marketing associations by the merging companies. As a result, this leads to increased wealth of the shareholders. Mergers and acquisitions often lead to greater market presence of the companies involved (Fleuriet 2008). Higher market shares that result from mergers and acquisitions often lead to increased purchasing ability and control over suppliers as suggested by Bruner (2004). When an organization buys a product in higher volumes than previously, the purchase cost becomes lower making the company become more price competitive. This has the potential of attracting greater sales and, therefore, higher value to shareholders. Mergers ad acquisitions may lead to improvements in company operations especially in the case of manufacturing companies as suggested by DePamphilis (2011). Therefore by increasing facilities through mergers and acquisitions, the company raises its capacity to manufacture more products or higher quality products. The company as well has its credibility increased which positively increases the shareholders wealth (Maddiganand and Zaima 1985). Mergers and acquisition often lead to symbiotic relationships between the two companies. As a result, the two companies tend to support one another, which in return helps the shareholders realize greater value from their investments. Mergers and acquisitions combine the operations of the two companies leading to higher sales capable of supporting their concurrent higher budgets hence raising the wealth of the shareholders (Cartwright and Schoenberg 2006). In some cases, mergers and acquisitions may not add value to shareholders’ wealth. This happens for example when management of one