| Mergers and acquisitions are a big part of the corporate finance world. A merger is when two or more companies combine their operations. Generally the combined company is able to negotiate lower prices with suppliers because of its bigger size and market. Jobs are sometimes also cut in mergers to save money. The idea is to increase the value of the combined company for shareholders. But that does not always happen. Some experts suggest that only one merger in three creates big gains for shareholders. At the same time, mergers can reduce competition, resulting in higher prices. The simplest way for companies to combine is through an acquisition. One company buys another. Companies may take a large part or a small part in guiding the policies of the businesses they acquire. Some investors buy controlling shares of stock in companies but leaving their management teams in place. |
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