mergers and acquisitions assignment/ essay / paper by assignmentlab.com

8/13/2019 Mergers and acquisitions assignment/ Essay / Paper by AssignmentLab.com

http://slidepdf.com/reader/full/mergers-and-acquisitions-assignment-essay-paper-by-assignmentlabcom 1/3

1

Mergers and Acquisitions Assignment

1. There is a common opinion that pursuing the goal of shareholder wealth maximization

and ethics are incompatible. This view is supported by the belief that people are

greedy for money. Thus, shareholder wealth maximization is believed to be opposite

to such concepts as honesty and the common good. However, it should be kept in

mind that shareholders are people who value the same common principles of fairness

and trust. Shareholder wealth maximization refers to increasing the price of the

company’s stock. When a company makes decisions that are guided by certain

principles, it is reflected in the price of its stock. If the company engages in a market

where participants (consumers or stakeholders) value ethics, then the price of the

stock will be decreased by unethical behavior. Thus, the possibility to pursue goals of

shareholders’ wealth maximization and ethics is possible only when the market is

coherent with this pursuit.

2. The price of the company’s stock reflects its market capitalization and possible

profitability. However, there are multiple other ways to value a business. A company

may be valued according to unique technologies it has or know-hows it owns. A

company may be valued based upon its brand or long-term reputation. Besides, a

current price of the company’s stock is determined by the market, which is highly

volatile and easily affected by external factors. Moreover, the price of the company’s

stock may be artificially lowered in order to make it easier to acquire the company

(consider the current situation with Nokia and Microsoft). Therefore, a company is

worth a price that is different from the price of its stock.

3. New England Wire and Cable was a business that could not keep up with the

changing technology in the industry. The company failed to implement innovations.

The company was in major financial difficulties. However, it was still possible to sell



2

the business since many of the shareholders did not realize that the company was

facing problems and there was no panic over the company’s stock. The company has

a good reputation and has been on the market for a long while; therefore, it still has

the potential to win the market. Thus, with the price of the stock being undervalued

and the situation with financing being dim, the company became a good candidate for

a takeover.

4. I agree with Garfield that people invest in stock to make money. The whole procedure

of investment was invented to allow people to receive profit from the financial

resources they have. However, I cannot agree that profit is the only goal that people

pursue when they buy corporate shares. This process of buying shares of a certain

business reflects trust that people put into that business. Therefore, I agree with

Jorgenson who stated that the company is worth more than the price of its stock. It is a

dualistic issue and one cannot make a decision that is inclined towards one opinion or

another.

5. Greenmail refers to the process of buying enough shares of the target company and

forcing it to buy them back at a premium instead of completing the takeover. The

company may also issue debt in response to possible takeover. This works especially

if the company engages in an agreement that debt should be paid out if an acquisition

occurs. It is also possible to restructure debt in such a way that if the company is

acquired, the acquiring company will have to pay back this debt. Thus, the acquirer

will have to find additional resources that will allow them to pay back the outstanding

amounts.



3

Works Cited

“A Union of Pariahs; The Ticketmaster - Live Nation Merger”, The Economist , London,

Jan.30, 2010, Vol. 394, Iss. 8667, p. 73. Print

Ante, Spencer E., Schatz, Amy, “T-Mobile Deal Faces Anti-Trust Barriers”, The Wall Street

Journal , March 11, 2011. Print

“Another One Bites the Dust; Manufacturing Blues”, The Economist , London, Jan.23, 2010,

Vol. 394, Iss. 8666, p. 53. Print

“In the Eye; Novartis’ Bid for Alcon”, The Economist , London, Jan.9, 2010, Vol. 394, Iss.

8664, p. 66. Print

Other People’s Money. Dir. Norman Jewison. Perf. Danny DeVito, Gregory Peck, Penelope

Ann Miller. Warner Bros. Pictures, 1991. Film.

mergers and acquisitions assignment/ essay / paper by assignmentlab.com

Documents