However, there are a number of reasons why mergers and acquisitions have been triggered in the recent recession of the economic cycle.Also, one needs to understand how and when the bid price is set. Since both the parties in the deal want to safeguard their interest in the deal whether it is a merger or an acquisition, they would want to reduce costs as well as increase the profitability of the venture. Therefore, a dilemma occurs at reaching a consensus of the bid price. There are various methods of financing as well (Deepak, 1990).This paper provides a brief overview of mergers and acquisitions, outlining the major characteristics of these activities. The implications and reasons for this increase in mergers and acquisitions will then be discussed keeping in mind two important examples. the acquisition of Cadbury by Kraft and the merger of British Airways and Iberia of Spain. Furthermore, this paper also defines the major ways through which these acquisitions or mergers are financed and how the concerning parties have been able to come to a consensus on a bid price. providing a solid conclusion in the end.Mergers and Acquisitions are a very important part of corporate finance. Throughout history, organizations have merged together to form bigger ones so that they are able to leverage out their revenues and decrease costs through various means. Usually, these deals involve huge amounts of money. as they are instrumental in shaping the future of the firm which is being formed as a result. However, there are various implications of these actions which shall be discussed (William, 2007).In the science of mergers and acquisitions, one plus one makes three. This equation may not hold true in mathematical circumstances but it sure does in the science of financial options. One of the major rationales behind such corporate actions is to allow the value creation above and beyond the value that the two separate companies were providing their stakeholders.
Corporate Finance Environment