Mergers And Acquisitions: Part I Essay

1251 words - 5 pages

Mergers, Acquisitions, and Corporate RestructuringMergers and Acquisitions (M & A) PaperIntroductionMergers and Acquisitions (M&A) is the name given to the process of companies acquiring some other companies or companies merging together with the economic objective of improve their competitive advantage and financial performance by anticipating and adjusting to changes in the marketplace. The history of mergers and acquisitions date back as early as the 19th century when the first merger wave took place in the United States called merging for monopoly and were mainly horizontal mergers. The two main factors behind every merger waves can be pointed as changes in the economic situation and technological advances, creating an opportunity for small and large enterprises to search for increased financial improvements. At the beginning, mergers were mostly between small firms looking to obtain a market advantage but the M&A process has matured and nowadays powerful companies also look to merge or acquire similarly powerful competitors to further cement their market presence and dominance. Factors like globalization have made the M&A movement a necessity for the survival of some companies by giving them the chance to join forces to weather economic downturns.Merger and Acquisition StrategiesMergers and acquisitions can be classified in different categories, been the most used horizontal mergers, when companies with similar products and position in the market join forces; vertical merger when a company join forces with either suppliers of clients and purchase mergers which is, as the name suggest, when a company simply buys another company. Since both Chevron and Texaco offered the same product, it only made sense to join these companies with a horizontal merger creating ChevronTexaco Corporation, a business that ranks with the world's largest and most competitive international energy companies. A large pro to a merger between to similar large companies such as Chevron and Texaco, is the merging with a competitor. With a large horizontal merger like ChevronTexaco, the joining of two powerful forces and industry leaders, there is less change of failure since a demand for energy and a future for this industry.Advantages of Mergers and AcquisitionsSince ChevronTexaco used a horizontal merger to join forces, the possibilities are endless since both are the leading energy companies and long-time partners. Together a U.S.-based, global enterprise is created that is competitive in all energy sectors. 'ChevronTexaco will have world-class upstream positions in reserves, production and exploration opportunities; an integrated, worldwide refining and marketing business; a global chemicals business; significant growth platforms in natural gas and power; and industry leading skills in technology innovation.' (Chevron.com, 2000).For a newly merged successful company such as ChevronTexaco a spin-off is an excellent option versus a divestiture. A...

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