Types of ownership Essay Example for Free

Types of ownership Essay My business will be a sole proprietorship because I will be in charge of the business but I would need to employ people to help me run the business. As I decide what happens to the profits I would pay for wages and then spend the rest on repairs and debts until I had paid off the necessary debts and loans. I have chosen a sole proprietorship because I get to be my own boss and if I am deciding what happens to the profit I know it will be spent in connection with the business . The disadvantages wont affect me because I have employed people t work for me therefore I wont have to work long hours . All skateparks around the uk are unincorporated because people ride skateparks at their own risk so if they injure themselves it is there own fault. The only way I could get prosecuted is if they are injured due to bad maintenance of the park i. e. somebody hurting themselves on a nail sticking out of a ramp. Cash flow is important because if you have a poor cash flow your business goes bankrupt. A cash flow forecast enables you to see how much money is coming into the business and how much is coming in and how much money is going out. If to much money is going out and not enough is coming in you can use the spreadsheet to see what needs to be changed. If you have a poor cash flow there is a lack of working capital. This can result in a lot of other problems like staff not getting paid on time and if loans arent repaid firms may take legal action against this and reposes things making the business unable to sell products. I would not have good facilities for anybody under the age of 12 with no great understanding of the sports or ability to do the sport

Why is it hard to build a good relationship? :: Ethical Issues, Lying, Cheating

The word relationship is defined as the way in which two or more concepts, objects, or people are connected, or the state of being connected. In daily life, we always have a relationship with other people. Biologically, our relationship with parents is made up when we were born. Also we are making a new relationship with a friend, boss, and girlfriend, but there some factors that it makes hard to keeping a relationship such as lying, cheating, and misunderstanding. Most of our relationships are built on trust other people. However, different perspectives can lead us to the hierarchical relationship. On the other hand, in different circumstances, people can be changed, so it gives a chance to get closer each other. Our daily life relationships are built on trusting other people. Generally, many people think that trustable relationships don’t have secrets, and don’t lie to each other. In addition to that we may feel more comfortable to have a trustable relationship, because they are always willing to help each other by telling the truth. When I was in high school, I remember one of my best friend who is extremely nice and positive person that I know. I had an unstable relationship with my girlfriend. He always stands by me, and tried to help me out every single time. I could tell him everything about my relationship, because I know I can trust him, and he gave me some superb advices to recover my relationship. In Kite Runner, we can find the relationship between Baba and his son Amir. Baba always protects Amir, and Amir feels very pleasant to have Baba as his father, because they trust each other. Amir says, â€Å"wanted Baba all to himself† (13), and thinks that â€Å"how lucky he was to have Baba as his father† (39). Baba also had a trust on Amir, since he won the kite tournament that â€Å"agreed to everything Amir asked† (81). After Amir won the kite tournament, Baba opened his heart a little bit, because now trusts Amir about that he can stand up himself a little bit. However, Baba said, â€Å"There is only one sin, And that is theft†¦ When you tell a lie, you steal someone’s right to the truth†(225). But it turns out he lied to his son Amir that he have another brother, who name is Hassan, Amir going to â€Å"reconcile†(226) the image of Baba that he haven been thinking of.

Evaluate the Evidence for Human Impacts on Downstream Flood Risk in Rural Catchment Areas in Temperate Regions

Evaluate the evidence for human impacts on downstream flood risk in rural catchments in temperate regions. Before we can evaluate human impacts on flood risk we must first establish what is meant by temperate regions and also rural catchments. Temperate regions are generally regarded as lying between the Tropic of Cancer and the Arctic Circle or the Tropic of Capricorn and the Antarctic Circle and therefore rivers investigated in this essay will fall within these parameters. Rural catchments are slightly harder to define, as today very few large rivers do not have some form of urban development within their catchments area. In this essay a river that is still in a predominantly rural catchment will be discussed even if there are areas of urban land within the catchment. Humans impact on flood risk falls into one of two categories. The first is deliberately and directly, through floodplain restoration, construction of dams and channel rehabilitation and all of these have fairly obvious positive effects on reducing flood risk. However it is when humans indirectly affect the flood risk, through deforestation, land use change and climate change (which all have a negative effect on flood risk) that there is less certainty into the extent of the impact that humans have. Overall though it is clear that human activity has resulted in ‘major changes’ (Goudie, 2006) in downstream flood risk in temperate regions and rural catchments. The most obvious way in which humans impact downstream flood risk is through direct adaptation of the river itself and this is also arguably also the most important way in which humans can have an impact on flood risk (Mrwoka, 1974). Damming is probably the most widespread example of how humans seek to control peak flows on rivers and the construction of dams in the UK has led to significant decreases in flooding. The reservoir created on the River Avon occupies 1. 38% of the catchment but reduces peak flow by 16% and even more impressively the reservoir on the Catcleugh in the Cheviots occupies 2. 72% of the catchment and reduces peak flow by 71% (Petts and Lewin, 1979). The creation of dams clearly reduces the flood risk overall, however, dams have a much smaller effect on rare flood events of high magnitude, due to the fact that there is a finite amount of water a dam can hold during times of high, prolonged precipitation (Goudie, 2006). On the River Avon the ratio of pre-dam discharges to post-dam discharges is a mere 1. 02 in a once-in-10 year event (Petts and Lewin, 1979). However, despite this, man’s construction of dams still has a large impact in reducing peak flood and therefore flood risk in downstream catchment areas. Floodplain restoration is another example of humans deliberately impacting on flood risk. It has been calculated that the flood reduction function of 3800 hectares of floodplain storage on the Charles River, Massachusetts saved US$ 17 million worth of downstream flood damage each year (US Corps of Engineers, 1972). Restoration has taken place on the River Cherwell between Oxford and Banbury. Here the embankments were removed and the channels restore to their pre-1900 dimensions. As a result of the rehabilitation of the channel peak flow was reduced by between 10-15% and the embankments which had been removed were shown to have been increasing peak flow by between 50-150% (Acreman et al, 2003). This clearly shows the extent to which humans can actively work to reduce the flood risk in a rural catchment area, and shows how important the role of floodplain restoration and channel rehabilitation is when reducing peak flows. A prime example of human activity indirectly affecting flood risk patterns is through deforestation. The principle here is that by removing vegetation, you remove the capacity for a significant percentage of precipitation to be intercepted by the vegetation and then evaporated before it reaches the stream. Therefore, if humans remove the vegetation in a catchment area this can increase run-off and therefore flood risk. An experimental study was conducted in 1910 to investigate the extent to which vegetation coverage affected peak flow in Colorado. Stream flows from two watersheds of approximately 80 hectares in size were compared over 8 years, before one valley was clear-felled. The catchment area which had experienced clear felling experienced 17% greater annual flow and also significantly higher peak flows (Goudie, 2006). In 1998 the Yangtze River experienced its worst floods for over 40 years, with high water remaining in some areas for 70 days. Although the precipitation over that time period was extreme, the extent of the flooding (which caused over $20billion in damages) has also been linked to the widespread deforestation that had taken place upstream of the floods. In 1957 the forest coverage of the river basin was 22% but by 1986 this figure had been reduced to 10% (Yin et al, 1998). Despite this, it has been argued that during times of prolonged rainfall, vegetation loses its ability to reduce peak flow as there is a finite limit to how much water vegetation can hold. A study on the Yangtze showed that under 90mm of heavy rainfall, surface run-off was 65mm in forested areas and 35mm in non-forested areas and therefore the forest does not retain more run-off (Cheng et al, 1998) and therefore flood risk is no greater. However, there can be no doubt that deforestation reduces seepage losses and therefore increases the convergence of seepage water and that deforestation increased the seriousness of the flooding that the Yangtze experienced in 1998 (Yin and Lee, 1999). The type of vegetation in a river basin can also have an influence on flood risk, and human activity can indirectly affect this. The principle here is that some types of vegetation retain more water than others and therefore their presence reduces flood risk. The catchment area of the Coweeta River in North Carolina was converted from deciduous hardwood forest to pine (which is evergreen) over a period of 15 years, from 1940 onwards, and as a result stream flow was reduced by 20% (Swank and Douglas, 1974). However, although certain types of plant may indeed significantly reduce stream flow, the impact they have on flood risk is often considerably smaller. It has been estimated that a forest of Ash juniper trees intercept around 40% of the precipitation that falls on them each year (Owens et al, 2006). This figure is so high as Ash juniper trees are evergreen and therefore absorb water all year round however, during storms, this figure is reduced to around 10%. This figure remains fairly similar for most vegetation during high storms. We can therefore say that although humans adapting the type of vegetation in a catchment area does have an impact on overall stream flow, the extent to which this reduces the flood risk downstream is negligible (Wilcox et al, 2006). Land use change is another example of human activity which, although it is not done with the intention of altering river flow characteristics, still has an impact on downstream flood risk. Developing urban areas in formerly rural ones is now widely acknowledged to have a ‘considerable’ hydrological impact, mainly thorough the ways in which it alters runoff (Hollis, 1988). Essentially this urbanization produces a tapestry of impermeable surfaces that increase run-off and therefore discharge during times of high precipitation (Graf, 1977). However, Hollis (1975) argues that whilst urbanization may increase the recurrence interval of small floods, in rare large scale floods, land use change has little effect on the overall peak flow, due to the fact that during large storms, rural areas become saturated quickly and then behave in much the same way as urban areas. Despite this, we can still say that land use change from urban to rural does increase the flood risk, even if this increase in risk is only during smaller events. Although we are examining flood risk in rural catchment areas, development of urban pockets in these areas must still be considered, as even catchments with only some urbanization are still more likely to suffer flooding (Wilson, 1967). Climate change is another way in which man indirectly can have an effect on flooding risk although this is a hotly contested topic, as no completely acceptable explanation of climate change has been presented before (Goudie, 2006). However, some climate models have still predicted that climate change over the next 100 years will lead to higher flood risk. This is due to the fact that in a warmer climate, the air can hold more water, which increases the potential for latent heat release during low pressure systems and therefore increased precipitation is likely (Frei et al, 1998). A model in 2002 produced by the EU group PRUDENCE compared summertime precipitation in mainland Europe from 1961-1990 and the forecast for 2071-2100 based on the climatic predictions made in the IPCC report. This found that although overall precipitation may slightly decrease over the summer, precipitation events in the 95th percentile for intensity would significantly increase (Christensen J and Christensen O, 2003). This would obviously increase the flood risk downstream in rural catchments. However, although climate change may, in the coming century, prove to have a significant impact on flooding, currently the topic is too heavily debated to draw any concrete conclusions on the extent to which human induced climate change increases flooding risk. We can therefore see that humans impact on flood risk in a variety of ways, some positive and some negative and all to varying degrees. It is worth bearing in mind that in some areas man may be impacting on flood risk in both a negative and positive way and therefore having an even larger impact on the stream than would at first be obvious. The evidence for man impacting on flood risk downstream in rural catchments is often disputed; however, it is clear that man is impacting on streams and flood risk. It is worth remembering that flooding is a perfectly natural event however rivers and the floods they can potentially unleash are in a delicate balance, and man is more than capable of upsetting that balance in a variety of ways.

The Motive Behind Merger And Acquisition Finance Essay - Free Essay Example

Sample details Pages: 11 Words: 3292 Downloads: 8 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? INTRODUCTION Background Mergers and Acquisitions have gained substantial importance in todays corporate world. This process is extensively used for restructuring the business organizations. Some well known financial organizations also took the necessary initiatives to restructure the corporate sector of India by adopting the mergers and acquisitions policies. Don’t waste time! Our writers will create an original "The Motive Behind Merger And Acquisition Finance Essay" essay for you Create order The  Indian economic reform since 1991 has opened up a whole lot of challenges both in the domestic and international spheres. The increased competition in the global market has prompted the Indian companies to go for mergers and acquisitions as an important strategic choice. The trends of mergers and acquisitions in India have changed over the years. The immediate effects of the mergers and acquisitions have also been diverse across the various sectors of the Indian economy. The Indian Economy has been growing at the fast rate and emerging as the most promising economy in the world. Be it in IT, RD, pharmaceutical, infrastructure, energy, consumer retail, telecom, financial services, media, and hospitality etc, there has been a sign of promising boom in the Indian economy. It is the second fastest growing economy in the world with GDP touching 8.9 % in 2010. Investors, big companies, industrial houses view Indian market in a growing and proliferating phase, whereby returns on capital and the shareholder returns are high. Both the inbound and outbound mergers and acquisitions have increased dramatically. According to Investment bankers, Merger Acquisition (MA) deals in India will cross $100 billion this year, which is double last yearà ¢Ã¢â€š ¬Ã¢â€ž ¢s level and quadruple of 2005. Indiaà ¢Ã¢â€š ¬Ã¢â€ž ¢s merger and acquisitions deal value in year 2010 reached almost US $50 billion which is three times of the deal value last year 2009. There were MA deals worth about $16 billion in 2009, down from close to US $40 billion in 2008. Definitions: Mergers: Mergers or amalgamation is combination of two or more companies to form as a single new company. In this process no fresh investment is made, however an exchange of shares takes place between the entities. In simple terms, a merger involves the mutual decision of two companies to combine and become one entity. Generally, merger is done between the two entities having similar size. Varieties of Mergers Mergers can be of various types. But there are 5 main mergers varieties which are valued most in the corporate world. Horizontal merger   Two companies that are in direct competition and share  the same product lines and markets. Vertical merger  Ãƒ ¢Ã¢â€š ¬Ã¢â‚¬Å" Two companies which are in the Value Chain. Market-extension merger  -  Two companies having same product but different target market. Product-extension merger  -  Two companies selling different but related products in the same market. Conglomeration   Two companies with unrelated business/ industry. Acquisitions Acquisition means buying the ownership of one company by another company, often as the part of the growth strategy. Unlike in merger, acquisition is generally done by a large company to a small one. Acquisitions can be either friendly or hostile. Like mergers, acquisitions are actions through which companies seek economies of scale, efficiencies and enhanced market visibility. Acquisition is done either in cash or acquiring the stock of the target company or both. Distinction between Mergers and Acquisitions Mergers and Acquisitions are often uttered as one and the same and considered to have the same meaning. But the terms merger and acquisition are two different term meaning. When one company takes over another independent company and clearly established itself as  the new owner, the purchase is called an acquisition. From a legal point of view, the  target company  ceases to exist and the buyer or the acquirer possesses the full control of the business and the buyers  stock continues to be traded, then it is acquisition. Regardless of the type of the strategic alliance they all have one purpose in common. They are all meant to create synergy that makes the value of the combined companies greater than the sum of the two parts. Synergy Synergy  is the force that is obtained when two or more components meet together to produces an exceptional result which when done solely cannot be achieved. In a business synergy takes the form of enhanced performance, increased profitability and exceptional cost reduction. By merging, the companies hope to benefit from the following: Staff reductions Economies of scale Acquiring new technology Improved market reach and industry visibility Importance of the study When a company wants to expand, there are various ways its can do. They can achieve the growth either by capturing the market share or by growing through strategic alliances. The main objective of the merger or acquisition is to achieve growth and synergy, economies of scale and capture or expand the market share. Buzz of merger and acquisition often creates hype in the financial market about the acquirerà ¢Ã¢â€š ¬Ã¢â€ž ¢s stock price. While most empirical research on merger focus on daily stock return surrounding announcement date, a few studies also look at long term performance of term performance of acquiring firm after merger.  [1]  Not only that, the performance of the company as a whole is also a matter of question mark. Will the company be able to perform better than it is doing or not? Problem Statement Many firm prior to merger and acquisition have an expectation to create a synergy from merger and acquisition. The main motive behind MA is to create efficiencies in the business and expansion of the business. But they most of the time ignore the fact that the effect of merger and acquisition has direct correlation with the value of the acquirers company and the stock price. The other problem that is to be considered is the financial risk associated with the MA. Research Objective The objective of this study is to gain the deeper and clear knowledge of the merger and acquisition on the acquiring firm. It also aims at the financial risk that a company may face post merger/ acquisition asa well as the long term performance of the acquirer. The objectives are as follows: To examine the effect of EPS myopia on the return of acquiring firms in mergers. Evaluate the effect on the stock price of the acquiring company post merger and acquisition. Critically evaluating if the shareholders of the acquiring companies experience wealth effect as a result of MA. The expected long term performance of the acquiring firm. Study of the financial risk pertaining to the merger and acquisition. Research Question What is the motive behind Merger and Acquisition? What is the effect on the stock price of the acquirer pre and post MA? Does the buzz create the bubble effect on the market or is it long lasting? What is the wealth effect of the acquirer firm post and pre MA? What is the trend of MA in Indian market? Drivers of MA in India What are the effects of MA to the competitors? Effect of the tax to the government post merger and acquisition. Limitations of the Study No proper information on the companies is found except for their Balance Sheet and Income Statement. This study is based on secondary database, so errors in the data could affect the results of the study. External factors such as economic conditions, regulatory changes etc are not taken into consideration. An overview of the Study This dissertation is divided into five chapters. The first chapter deals with the background information, problem statement, objective of the study, importance of study, research question limitation of the study. The second chapter deals with literature review. This chapter indicates the theoretical framework of the valuation method of Merger and Acquisition. It shows the detail description of the past research that has been done on the topic and discusses the outcome of the study. The third chapter deals with the research methodology of the dissertation. It deals with the Research method used for the data and information collection. It includes sample selection/design procedure, data collection and data analysis tools used in the dissertation. In this part assumptions had been made where there is lack of appropriate data and information. The fourth chapter deals with analysis and interpretation of the financial data that are used to achieve the objectives of the disserta tion. This section mainly deals with the findings from the study and also focuses on the analysis and its results. The fifth and the last chapter of this dissertation present the findings of the study, recommendation of the study to the investors, financial managers regulators. It also concludes the suggestions for future research. Chapter II Review of the Literature 2. Literature Review Many authors and writers have written lot about merger and acquisition and its impact on the performance of the company as well as on the economy. A great deal of research has been carried out on the performance of the corporations involved in the merger and acquisition. When a company wants to jump start a long term growth or boost up the corporate performance, MA may seem to be the best option. Yet study after study puts the success rate of MA lies just between 20% and 30%. A lot of researcher had tried to explain the abysmal statistics, usually by analyzing the attributes of the deals that worked and those that didnà ¢Ã¢â€š ¬Ã¢â€ž ¢t. What is lacking is the robust theory that identifies the causes of those success and failures.  [2] 2.1 Merger and Acquisition: Conceptual Review Farlex Financial Dictionary  [3]  has defined à ¢Ã¢â€š ¬Ã…“A decision by two companies to combine all operations, officers, structure, and other functions of business. Mergers are meant to be mutually beneficial for the parties involved. In the case of two publicly-traded companies, a merger usually involves one company giving shareholders in the other its stock in exchange for surrendering the stock of the first companyà ¢Ã¢â€š ¬? Pratap G. Subramanyam (2005) has stated merger as in the term associated with the integration of one company into another. The merging company should exist thereafter and all its assets and liabilities get legally vested in the merged company. This means that the merger means amalgamation of the assets of the two or more companies to form a new company serving the similar or different purpose. 2.1.1 Recognition of amalgamation (merger) by Indian Statutory Bodies The Company Act of India does not define an amalgamation or a merger. Therefore, the term are being interpreted as being included in the term à ¢Ã¢â€š ¬Ã‹Å"arrangementà ¢Ã¢â€š ¬Ã¢â€ž ¢ as defined in Section 390(b). This is vindicated by the fact that Section 394 talks about arrangement that are in nature of amalgamation of two or more companies. It is possible under Companies Act for two or more companies to amalgamate using the shareholder approval route under Section 293(1)(a) though such route is never adopted. The more appropriate route is to get court order under Section 394 of the Act, which has been specifically enacted to enable amalgamations. Section 390 This section provides that à ¢Ã¢â€š ¬Ã…“The expression à ¢Ã¢â€š ¬Ã‹Å"arrangementà ¢Ã¢â€š ¬Ã¢â€ž ¢ includes a reorganization of the share capital of the company by the consolidation of shares of different classes, or by the division of shares into shares of different classes, or by both these methodsà ¢Ã¢â€š ¬? Section 394 This section contains the powers while sanctioning scheme of reconstruction or amalgamation. Under the Income Tax(IT) Act, 1961 Section 2(1B) the word amalgamation in relation to companies means the merger of one or more companies to another company or the merger of two or more companies to form one company so that: All the property of the amalgamating company or companies before the amalgamation becomes the property of amalgamating company by virtue of the amalgamation. All liabilities of the amalgamating company or companies immediately before the amalgamation become the liabilities of amalgamating company by the virtue of amalgamation. Accounting Standard AS-14 defines amalgamations as those pursuant to the provisions of the companies Act or any other statute, which may be applicable to the companies. Therefore, it applies to all transactions that come under the purview of Section 391-394 of the Companies Act that relate to integration of two or more com panies. AS-14 categorizes amalgamation into two categories: (a) amalgamation in nature of merger (b) amalgamation in nature of purchase. An amalgamation fall into former category if: All assets and liabilities of transferor company become after amalgamation, the assets and liabilities of the transferee company. Shareholders holding not less than 90% of the face value of the equity share of transferor company (excluding the shares held by the transferee company), become the equity shareholder of the transferee company by virtue of the amalgamation. The consideration for the amalgamation, receivable by those equity shareholders of the transferor company who agree to become the equity shareholder in the transferee company, is discharged wholly by issue of shares (except for fractional shares that may be settled in cash). The business of the transferor company is intended to be carried on by the transferee company. Acquisition is the mechanism by which companies change hands and through transfer of ownership of share or transfer of control. Acquisition means the purchase of or getting access to significant stakes in a company, often making such acquirer a major shareholder or force in the company. According to Dictionary of Financial Term  [4]  Ãƒ ¢Ã¢â€š ¬Ã‹Å"If a company buys another company outright, or accumulates enough shares to take a controlling interest, the deal is described as an acquisition.à ¢Ã¢â€š ¬Ã¢â€ž ¢ For example, if Corporation A buys 51% or more of Corporation B, then Corporation B becomes a subsidiary of Corporation A, and the activity is called an acquisition. A single investor may buy out a publicly-traded company; one calls this going private. Acquisitions occur in exchange for cash, stock, or both. Acquisitions may be friendly or hostile; a friendly acquisition occurs when the board of directors supports the acquisition and a hostile acquisition occurs when it does not. 2.1.2 The Acquisition and Takeover Code in India After the advent of the SEBI, introduced in 1994, there was a concerted attempt at formulation of a comprehensive framework under which acquisition and takeover could be made in existing listed companies. However the takeover code does not apply to unlisted companies and continue to be regulated by the provision of the Company Act. Listed companies are currently governed by the provision of Takeover Code, clause 40A and 40B of the Listing Agreement of the stock exchange and Section 108B and 108D of the Companies Act as regards acquisition and takeovers. Under the provision of Section 108B, corporate under the same management holding whether singly or in aggrete.10% or more of the nominal value of the subscribed equity share capital of the any other company shall, before transferring one or more such shares, give to the central government an intimation of its proposal to do with the prescribed details. Section 108D provides the similar provision wherein the Central Government can act suo moto of any transfer of a block share in a company. All the Sections under 108 are backed by Section 108G. Section 108G Applicability of the provisions of sections 108A to 108F.à ¢Ã¢â€š ¬Ã¢â‚¬ The provisions of sections 108A to 108F (both inclusive) shall apply to the acquisition or transfer of shares or share capital by or to, an individual firm, group, constituent of a group, body corporate or bodies corporate under the same management, who or whichà ¢Ã¢â€š ¬Ã¢â‚¬  (a) is, in case of acquisition of shares or share capital, the owner in relation to a dominant undertaking and there would be, as a result of such acquisition, any increaseà ¢Ã¢â€š ¬Ã¢â‚¬ Ãƒâ€š (i) in the production, supply, distribution or control of any goods that are produced, supplied, distributed or controlled in India or any substantial part thereof by that dominant undertaking, or (ii) in the provision or control of any services that are rendered in India or any substantial part th ereof by that dominant undertaking; or (b) would be, as a result of such acquisition or transfer of shares or share capital, the owner of a dominant undertaking; or (c) is, in case of transfer of shares or share capital, the owner in relation to a dominant undertaking. The SEBI Takeover Code brought in several new features into acquisition law which were not present in Clause 40A and 40B. The basic theme of the code is to provide for fair play and transparency in acquisition and takeover but at the same time to ensure that they are not stifled into extinction. 2.2 Differentiation of Merger and Acquisition In general Mergers and Acquisitions are used interchangeably, but they have a subtle differentiation in there meaning. Weston and Copeland (1992) distinguished merger and acquisition: merger as a transaction between more or less equal partners, while acquisitions are used to denote a transaction where a substantially bigger firm takes over a smaller firm. Their basis of distinguish was the size. But there are other factors apart from size that denotes the differences between merger and acquisition. Asquith Mullins (1986) define mergers and acquisitions on basis of share distribution. When two firms merge, shares of both are surrendered and new shares in name of the new firm will be issued. Unlike in merger, shares of the acquiring firm are not surrendered but traded in the market prior to the acquisition and continue to be traded by the public after the acquisition. The shares of the target firm cease to exist publicly. Motives behind Merger and Acquisition There are three major motives for the mergers and takeovers: Synergy, Agency, Hubris Synergy motive means that the sum total return/value from the integration of two or more companies should be greater than that from the individual company. Elazar Berkovitch (1993) suggests that the takeovers occur because of economic gains that results by merging the resources of the two firms. They even concluded that total gains from MA are always positive and thus can say that synergy appears. The agency motive suggests that takeovers occur because they enhance the acquirer managementà ¢Ã¢â€š ¬Ã¢â€ž ¢s welfare at the expense of acquirer shareholders. Elazar Berkovitch and M. P. Narayanan (1993) suggested three major motives for mergers and acquisitions: synergy, agency and hubris. The synergy motive suggests that the takeovers occur because of economic gains that results by merging the resources of the two firms. The agency motive suggests that takeovers occur because they enhance the acquirer managementà ¢Ã¢â€š ¬Ã¢â€ž ¢s welfare at the expense of acquirer shareholders. The hubris hypothesis suggests that managers make mistakes in evaluating target firms, and engaged in acquisitions even when there is no synergy. Khemani (1991) states that there are multiple reasons, motives, economic forces and institutional factors that can be taken together or in isolation, which influence corporate decisions to engage in MAs. It can be assumed that these reasons and motivations have enhanced corporate profitability as the ultimate, long-term objective. It seems reasonable to assume that, even if this is not always the case, the ultimate concern of corporate managers who make acquisitions, regardless of their motives at the outset, is increasing long-term profit. However, this is affected by so many other factors that it can become very difficult to make isolated statistical measurements of the effect of MAà ¢Ã¢â€š ¬Ã¢â€ž ¢s on profit. The free cash flow theory develo ped by Jensen (1988) provides a good example of intermediate objectives that can lead to greater profitability in the long run. This theory assumes that corporate shareholders do not necessarily share the same objectives as the managers. The conflicts between these differing objectives may well intensify when corporations are profitable enough to generate free cash flow, i.e., profit that cannot be profitably re-invested in the corporations. Under these circumstances, the corporations may decide to make acquisitions in order to use these liquidities. It is therefore higher debt levels that induce managers to take new measures to increase the efficiency of corporate operations. According to Jensen, long-term profit comes from the re-organization and restructuring made necessary by takeovers.