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Source : http://knowledge.wharton.upenn.edu
Activity:
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last activity : 07 06 2010 20:18:04 +0000
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Recent trend is of mergers and acquisitions and every organization is on the footsteps of this trend .
Some examples are as follows – with Bank of America acquiring FleetBoston and J.P. Morgan Chase linking up with Chicago-based Bank One – Comcast Corp. jumped in the fray this week with a $54.1 billion unsolicited takeover bid for The Walt Disney Co.
CEO's do these sorts of deals to benefit shareholders keeping in mind the synergies, market share and economies of scale. But to your surprise ,most deals don’t make money for shareholders in acquiring companies.
Well the Question is?
Who makes these mergers possible a CEO's effort or the reaction of market???.
It is said that these mergers do not provide any value to shareholders but CEO does not approve this information they may be too confident in their own abilities and thus in their companies’ prospects, they believe that their deal will trump all the mediocre ones that have come before.
These CEOs overestimate the positive impact of their leadership and their ability to select profitable future projects and they may also overestimate the synergies between their company and a potential target or underestimate how disruptive a merger will be.
They go for the deals knowing the fact that it will attack value of shareholders.
They could be compared with “rational CEOs” – and “overconfident CEOs are more likely to conduct mergers than rational CEOs at any point in time.”
So, will this confidence result into some good fortunes for shareholders too .
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