Corporate Finance-Mergers and acquisitions Essay

Corporate Finance-Mergers and acquisitions - Essay ExampleGenerally, mergers are brought astir(predicate) in a consensual and cordial environment where the target company helps the purchaser in a due diligence process to ensure that the deal is beneficial to both parties. But acquisitions are sometimes hostile, in that the acquiring company purchases in the open market a majority of outstanding shares of the target company against the wishes of the target companys board of directors.Mergers and acquisitions should be value creating for the shareholders of both the offeror and the offeree companies. Value creation is also necessary for further growth. Creating value implies earning a return on invested capital in excess of the cost of capital all over time or earning a strictly positive profit, that is where revenue minus all expenses is greater than zero.Value creators do not have to worry about a capital shortage. They are either flush with internal funds to meet their investmen t needs, or can attract the needed capital from the markets, which are always in search of profitable investment opportunities. And such companies will also create over time a cadre of managers who have higher(prenominal) standards and better capabilities than the competition.Many companiCurrent state of M&A Many companies have had recourse to M&A as a sure path to dissipated growth. Operational synergy and economies of scale are the strengths of M&A propelling growth. But the failure of many M&A in the 1990s has real reduced shareholder value instead of increasing it and as a consequence, both management and investors are now taking a closer watch at what makes a merger or acquisition a success or a failure. (KW, 2003). But there have been some excommunications and one exception has been the recent acquisition of Arcelor by Mittal. The Acquisition of Arcelor by MittalThe rise of Mittal brand name has been a story of growth and expansion through acquisitions, beginning with th at of the Iron and Steel Company of Trinidad and Tobago in 1989 and culminating in 2006 in the acquisition of Arcelor, Europes largest steel producer. Mittal has grown by buying struggling steel plants around the world and knitting them into the worlds biggest steel company. It has a strong presence in North America and Europe, but in Asia its operation is confined to Kazakhstan. It is the worlds largest and most global steel company, with shipments of 49.2 million haemorrhoid and revenues of over $28.1 billion in 2005, owning steel-making facilities in 16 countries and employing over 224,000 people. The shares of the company are listed on the New York and Amsterdam stock exchanges. The company produces a great range of products for the flat and long products markets and has among its customers well known names in the automotive, engineering and appliance sectors. (http//www.mittalsteel.com/company/Profile.htm)Mittal Steel announced its intention to acquire Arcelor on 27 January 2 006, for a total of 24 billion euros. Arcelor had been created in 2002 by the merger of Aceralia, Arbed and Usinor, with an intention of mobilizing their technical, industrial, and commercial synergies in a joint