Management Model : A Framework For Evaluation Of Alternative Mergers In The Wake Of Down-Turn

Abstract

. When two firms of equal size agree to form a new firm, this action is called as a merger. The new firm stock is issued to . the existing shareholders. The merger of Glaxo Wellcome and Smith Kline Beecham into GlaxoSmithKline in 1999 is an example of a merger. On the other hand, when one company takes over or buys another company, it is known as an acquisition. The mergers and acquisitions ensure the competitive edge, increase the firm's value, achieve internal and external economies, upgrade technology, acquire major market share and develop a strong leadership in the industry. The guiding principle in mergers and acquisition is 'synergy', which is implied in the equation form as 2 + 2 = 5. In other words, this process of combination results in the creation of 'additional value'.