ABSTRACT
A number of terms relating to the whole area of acquisitions and mergers regularly appear in the financial press. Certain terms appear in the financial press when merger activity is being reported and these may relate to the takeover process and tactics which are employed, usually by the recipients of an unwelcome bid. There are many apparent managerial motives which are put forward to justify an acquisition strategy, some of which appear more logical than others. Financial theory dictates that managers take business decisions in order to maximize the wealth of the firm’s shareholders. External agents of change may also promote merger. If an acquisition involves purely the purchase of assets, a buyer is less exposed to taking on unidentified liabilities than if the shares of a company are acquired. The exercise helps test out the purchaser’s assumptions in valuing the company, and can assist in identifying major issues that might affect the value of the business.
