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Most corporations are very familiar with merger and acquisition strategies. For example,
the latter half of the twentieth century found major companies using these strategies to
grow and to deal with the competitive challenges in their domestic markets as well as
those emerging from global competitors. Today, smaller firms also use merger and
acquisition strategies to grow in their existing markets and to enter new markets.
The Popularity of Merger and Acquisition Strategies
Merger and acquisition strategies have been popular among U.S. firms for many years.
Some believe that these strategies played a central role in the restructuring of U.S.
businesses
during the 1980s and 1990s and that they continue generating these types of benefits
in the twenty-first century. firms use merger and acquisition strategies to improve their
ability
to create more value for all stakeholders including shareholders.
Financial slack
Low debt position
Innovation
Flexibility and adaptability
Restructuring
One party buys all of a firm's assets in order to take the firm
private (or no longer trade the firm's shares publicly)
Private equity firm: Firm that facilitates or engages in taking a
public firm private
Why LBOs?
Protection against a capricious financial market
Allows owners to focus on developing innovations/bring them to
market
A form of firm rebirth to facilitate entrepreneurial efforts