CREATING OR DESTROYING VALUE THROUGH MERGERS AND ACQUISITIONS?

Sehleanu Mariana ()
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Sehleanu Mariana: Universitatea din Oradea, Universitatea din Oradea

Annals of Faculty of Economics, 2015, vol. 1, issue 1, 593-600

Abstract: The avalanche of operations performed and their specificities revealed several motivations for mergers and acquisitions However, although they are concluded with the purpose of value creation, reality has shown that in many cases it was exactly the opposite, these transactions led to value destruction. The paper aims to analyze the operations of mergers and acquisitions starting from the value theories, emphasizing their motivations and consequences regarding value creation. This is a theoretical research and we have used as a research method the qualitative approach in order to identify the motivations and the generating factors of mergers and acquisitions. Mergers and acquisitions can contribute to the creation of value, the main motivation being represented by the improvement of the economic performance of the new entity formed, by achievement of synergies, by increasing market power or by replacing inefficient management teams. However, the reality showed that these operations haven’t always a beneficial role for the “health” of a company that wishes to adopt an external growth strategy. Analyzing from an opposite perspective, we emphasized the motivations underlying value destruction by mergers and acquisitions. The existence of conflicts of interest between managers and shareholders, of a free cash flow, the managers’ desire to strengthen their position in the company to built an “empire” or even the pride and overconfidence of the managers regarding their abilities to create value are other reasons that underlie the occurrence of these operations.

Keywords: mergers and acquisitions; value increasing theories; value destroying theories. (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2015
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