The Financial Analysis of Merger Opportunities

Andrew M. McCosh and Michael S. Scott Morton

Chapter 7 in Management Decision Support Systems, 1978, pp 130-160 from Palgrave Macmillan

Abstract: Abstract The example in this chapter is concerned with the complex and increasingly important field of business combinations. The number of mergers and acquisitions which have taken place has expanded rapidly and at an ever increasing pace in recent years. Conglomerate enterprises have led the merger movement, of course, but a significant number of mergers are being carried out by other corporations which do not make a habit of acquisitions. Many small family-owned corporations are interested in seeking a merger partner for a variety of reasons. The head of such an organization may be approaching retirement age and may wish to convert his small but valuable business into a more liquid holding. Some small businesses find it useful to become associated with larger companies to make economies of scale possible. An important aspect of the merger movement from the viewpoint of the selling corporation is the income tax problem. If the seller disposes of his entire corporation for cash, he will probably be subject to capital gain taxes amounting to one quarter of the proceeds of sale. This can be very expensive and many sellers prefer a securities exchange basis, which defers income tax and capital gain payments for a substantial interval at the option of the seller.

Keywords: Cash Flow; Stock Price; Parent Company; Payout Ratio; Prefer Stock (search for similar items in EconPapers)
Date: 1978
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-02764-4_7

Ordering information: This item can be ordered from
http://www.palgrave.com/9781349027644

DOI: 10.1007/978-1-349-02764-4_7

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().