Expansion and Merger Research Paper Example | Topics and Well Written Essays - 1500 words

Expansion and Merger - Research Paper Example The laws relating to merger as embodied in sections 391 to 396 of the companies Act, 1956 enable the government to oversee if the companies in need of merger follow procedures and requirements necessary for merger as consideration of the tribunal (Wilson, 2011). Another reason why the government need to regulate market during a merger is because, it is the government’s duty to oversee whether the management of the target merging firm can secure itself form hostile and harsh takeover through a number of various financial as well as legal defenses. The need for government regulation in this case serves as a law that tends to be deferential to defenses for as long as the target the target company does not act primarily to preserve its own position. The government becomes skeptical during a merger since the management of a target company subject for acquisition may negatively affect the society if employees of this company lose their jobs as this increase the percentage of the une mployed in a country. In the United States, the rationale for government intervention is helping in assessing those mergers based on hubris and power without accounting for consequences involved (Burge, 2008). Consequently, the government is now able, with the help of defense laws, to facilitate majority of mergers rendering transactions friendly and negotiable. Hence, preserving and accounting for interests of parties involved by following the rule of law to the latter. Furthermore, the government intervention in the market process remains justified since it ensures that the combined size of the new corporation cannot monopolize power rendering the merger unlawful. Another rationale for government market intervention is that it regulates purchasing power of companies. In this situation, the law offers tender protocols that require whoever is purchasing anything beyond 5 percent of company’s shares to identify him or herself, make particular public disclosures, and announce t he reason for the share purchase and any terms and conditions of the tender offer. When companies decide to work on self-expansion, complexities regarding things like capital arise. Subsequently, business expansion or growth is a stage in the life of a company that is fraught with not only opportunities, but also perils. In addition, business expansion carries with it a corresponding increase in financial fortunes for owners and employees as well. When intended companies fail to merger due to unavoidable circumstances and at the same time decide on expanding on its own, it requires additional financing. Getting the extra capital for expansion may prove to be a hard task since small businesses planning to expand encounter drawbacks that make them vulnerable to market strategies that renders small businesses inadequate for advantageous terms available in the capita market. Another complexity associated with capital projects that is likely to rise is unbalanced sales revenue. In some b usinesses, stakeholders expect to see growth in value of company’s stock. Nevertheless, due to unpredicted downward growth in the trend market share, amount of revenue obtained from sales deteriorate causing the company to face difficulties while in its plans of expansion. Additionally, at times of expansion, companies face more complexities pertaining to capital projects, as the firm requires more room for expansion. Raising extra capital to buy land for firm’