PURE DIVE RSIFI

CATI ON

Diversif ication provide s

numero us benefits tomana

gers, employ ees, owners

of the firmsan d to the firm

itself. Diversif ication through

mergers is commo nly

preferre d todivers ification

through internal growth, giventha

t the firm may lack

internal resource s orcapabi

lities requires.
6

STRA TEGI C

REAL IGNM ENT

TOCH ANGI NG

ENVI RON

MEN T

It suggests that the firms

use the strategy of M& As as

ways to rapidly adjust to changes

intheir external environ ments.

When acompa ny has an

opportu nity of growtha vailable

only for a limited period

of timeslo w internal

growth may not be

sufficie nt.
7

HUB RIS HYPO

THES IS

Hubris hypothe sis implies

that manage rs lookfor

acquisiti on of firms for their

own potentia lmotive s and

that the econom ic gains are

notthe only motivati on for

the acquisiti ons.

This theory is particul

arly evident in case of comp

etitive tender offer to acquire

a target. T he urge to win

the game often results

in thewinn ers curse

refers to the ironic hypothe

sisthat states that the firm

which overesti matesth e value

of the target mostly wins

theconte st.
8
Theories of Mergers
Add To Collection 5.6K Reads 37 Readcasts 2 Embed Views Published by rashwanth

TIP Press Ctrl-F to search anywhere in the document.

Info and Rating

Category: Uncategorized. Rating: Upload Date: 11/18/2009 Copyright: Attribution Non-commercial Tags: This document has no tags. Free download as PDF File (.pdf), Powerpoint Presentation (.ppt), text file (.txt) or view presentation slides online. Flag document for inapproriate content