Write a 5 page essay on Analyzing Effects of Merger and Acquisitions on the Recent Worldwide Financial Crisis.Download file to see previous pages... The increased Mergers and Acquisition activities ca

Write a 5 page essay on Analyzing Effects of Merger and Acquisitions on the Recent Worldwide Financial Crisis.

The increased Mergers and Acquisition activities can be attributed to globalization, funding at low cost, and the financial turmoil, which is being experienced across the globe (Luc 2010). The three factors have led to increased demand for creation and formation of large business entities in order to compete effectively while seeking growth as a way to increase profits. According to Senese (2009), mergers and Acquisitions have also increased due to the fact that governments have introduced various reform programs in order to revive the economic sector. These programs have led to increased capital flows as a result. Market liberalization is also in the increase in the developing countries, which has further led to demand for mergers and acquisitions. Increased growth for mergers can also be attributed to the increased global investment in seeking better rates of return, and a means to diversify risk. Many businesses prefer venturing overseas. Nowadays, mergers and acquisitions have proved to be common events within the economy. This paper analyzes the effect of mergers and acquisitions on the recent worldwide financial crisis. The effects of mergers and acquisition during the financial crisis will also be analysed in the Banking industry. Discussion Many strategic investors use the terms ‘mergers’ and ‘acquisitions’ interchangeably while making investment decisions. It is, however, important to know the difference between the two terms. Mergers come as a result of two equal entities coming together to form one single business. On the other hand, acquisition involves a smaller company becoming part of a bigger, existing company, which is the acquiring firm. The recent worldwide financial crisis has subjected the financial markets to uncertain environments that are volatile, too. The markets are currently in a vicious cycle of investor redemptions and asset deleveraging. Prices have also declined significantly. Credit spreads have also gone to undesirable levels with indices of equity dropping by 25% in the year 2008. Global demand has also been marked to decline. hence depressing prices of commodities (Mankiw 2009). All these market conditions, among them decreased oil prices, have led to the global downturn.