Over the past decade, Mergers and Acquisitions (M&As) has\u00a0reached unprecedented levels as companies use corporate financing\u00a0strategies to maximize shareholder value and create a competitive\u00a0advantage. Acquisitions occur when a larger company\u00a0takes over a smaller one; a merger typically involves two relative\u00a0equals joining forces and creating a new company.<\/p>\n
Most Mergers\u00a0and Acquisitions are friendly, but a hostile takeover occurs when\u00a0the acquirer bypasses the board of the targeted company and\u00a0purchases a majority of the company\u2019s stock on the open market.<\/p>\n
A merger is considered a success if it increases shareholder value\u00a0faster than if the companies had remained separate. Because\u00a0corporate takeovers and mergers can reduce competition, they\u00a0are heavily regulated, often requiring government approval.<\/p>\n
To\u00a0increase the chances of a deal\u2019s success, acquirers need to perform\u00a0rigorous due diligence\u2014a review of the targeted company\u2019s\u00a0assets and performance history\u2014before the purchase to verify\u00a0the company\u2019s standalone value and unmask problems that could\u00a0jeopardize the outcome.<\/p>\n