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Mergers and Acquisitions Research Paper

A merger refers to a situation where two or more companies unite to form a single company and this kind of bonding is found among medium sized and small companies. Acquisition occurs when one company is bought by another one. These two aspects are meant to promote growth of the companies involved. This paper addresses the various mergers that took place in United States and their effects.

Let us take a look at the merger that took place in the banking industry in the year 2004 between the Bank of America corp. and FleetBoston Financial corp. In this merger the bank of America corp. acquired the ownership of FleetBoston financial corp. This means that the company that was bought existed under new ownership and as a result its identity was changed to resemble that of the bank of America corp. (Straub, 2007)

A cross check on the history of FleetBoston suggests that the bank had successfully merged with another financial institution known as BankBoston and its previous identity was fleet financial group. The history of FleetBoston indicates that this is not the last merger that’s happening involving FleetBoston.

This shows that the management of this organization is determined and will do anything just to make sure they remain operational with a wider customer base. The bank of America had also entered into a merger which had seen it grow tremendously and since it was ranked third in US it had the required base to buy the FleetBoston bank.

The bank of America also had a failed merger with a stock brokerage institution known as Merrill Lynch in 2008.The merger seemed attractive on paper but on the ground it was very tough.

According to Depamphilis (2008), the bank of America lost many customers after acquiring the ownership of the stocks brokerage firm because the existing customers had personal relationships with the employees of the outgoing owners; people can not trust people who are not known to them. This loss of clients happened because the bank of America could not retain the organization culture of the outgoing Merrill.

Before an acquisition takes place there are a few things that the new owner to be should consider and they are namely (1) asset assessment, (2) historical earnings, (3) future maintainable earnings assessment, (4) comparable company and comparable transactions and (5) discounted cash flow assessment.

Get your 100% original paper on any topic done in as little as 3 hours Learn More These factors are used to determine the cost of acquisition (Depamphilis, 2008). In this case the cost of buying FleetBoston was 47 billion. The above stated factors were important and remain like so because by acquiring the ownership of FleetBoston the bank of America was going to bear all the losses that were being incurred by the bought company and besides it had to take the unknown risks. In the final end the FleetBoston was no more because its shares were now owned by the bank of America.

Straub (2007) argues that there are various reasons for mergers and acquisitions. First, merging companies reduces the cost of operations as opposed to when the companies are being run as independent entities. This results in rise in company proceeds because there are several sellers of goods and services hence the union causes the group of companies to have an upper hand in business.

When a smaller company buys a bigger company it stands to raise its proceeds and also improve its market share. This is because the acquired company could have managed to gather many customers and hence the new owners do not need to look for new customers.

Acquisition promotes cross trading because the incoming company can sell its products and services to the existing customers of the outgoing owners. For instance if a company that deals with insurance brokerage was bought by a company that sells automobiles the customers of the insurance company can buy automobiles from the new owner of the company.

An example in Information Technology industry involves the case of Google when it purchased Like.com in August 2010 for almost $100 million with an aim of improving the IT infrastructure of Boutiques.com. Google integrates managers, websites, employees, network, and data in driving its IS strategy. With its newly implemented e-commerce site, Boutiques.com, Google seeks to widen its market base by offering customers new ways of searching and purchasing clothes and accessories (Efrati

Economic Theory of 3rd World Country Essay

Nursing Assignment Help Bangladesh is a third world country with an estimated income per capita of more than $1,500 (Gillan, 2010, p. 6). In recent years, the country has been experiencing a good and sustainable economic growth rate of 6-7 % (Gillan, 2010, p. 13). It should be known that economic theory is the substantiation and explanation of various economic aspects. As a matter of fact, it is an accepted knowledge that tries to come up with a good set of phenomena.

Consumerism is a very important economic theory in the current developing world. The theory tries to acknowledge the fact that an increase in the consumption of goods and services in an economy can enhance the rate of economic growth and development (Gillan, 2010, p. 9). In this case, it tries to explain that any increase in consumption will create a positive demand for various goods and services in an economy.

In a broad perspective, the theory of consumerism has been used by various countries to enhance economic development. As a matter of fact, Bangladesh has witnessed a good economic growth rate because of an increase in consumer demand for various products (Gillan, 2010, p. 17). As much as half of the country’s GDP comes from the service sector, the agricultural sector employs half of Bangladeshis.

The country receives a lot of remittances from abroad and this has been its major source of foreign exchange earnings. As a matter of fact, the country exports various textiles and garments and this has also given it a lot of foreign exchange earnings (Gillan, 2010, p. 21). In extreme cases, it should be known that Bangladesh has been developing because of a good economic environment. As a matter of fact, the country has a good and sound financial environment that enhances the growth of businesses.

As much as the theory of consumerism greatly applies to Bangladesh, the rate of foreign direct investments has not been impressive as expected. It should be known that the country has a rich and vast human resource base that will continue to enhance its economic growth rate. Because of a vast and rapid economic growth rate, there have been a lot of improvements in infrastructure development to support various economic sectors (Gillan, 2010, p. 34).

China is a first world country with a rapid economic growth rate. As a matter of fact, the country is the world’s second largest economy. In addition, the country prides itself as the world’s fastest growing economy (Phang, 2010, p. 11). This is as far as average growth rates are concerned. In this case, it has been having an economic growth rate of 10 % (Phang, 2010, p. 17).

Because the theory of consumerism promotes the consumption of goods and services, it should be known that China has a very large population that creates a large market base for its goods and services. In this case, its population of more than 1 billion people has been instrumental in enhancing the consumption of goods and services (Phang, 2010, p. 17). Currently, the country is the world’s largest exporter.

Get your 100% original paper on any topic done in as little as 3 hours Learn More Chinas labor force is currently estimated to be more than 813.5 million (Phang, 2010, p. 18). As a matter of fact, 42% of the country’s GDP comes from the industrial sector. On the other hand, agriculture absorbs 39.5% of the country’s labor force (Phang, 2010, p. 21). This is despite the fact that it contributes 10.6% of the country’s GDP (Phang, 2010, p. 25). China has various industries that have contributed to its economic growth rate. Some of these major industries include mining and ore processing, ornaments, chemicals, electronics, automobiles and other equipments.

As far as economic growth is concerned, a country should be able to stimulate demand. This will end up increasing the rate of consumption for various goods and services. Both economies have been growing because of an increase in consumption. This can be explained from the fact that various industries have been growing because of an increase in the demand of goods and services.

Reference List Gillan, A. (2010). From Bangladesh to Brick Lane. London: The Guardian.

Phang, S. (2010). China Overtakes Japan as World’s Second-Biggest Economy. Harvard: Harvard University press.

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