Module 5 SLP Assignment Example | Topics and Well Written Essays - 500 words

Module 5 SLP - Assignment Example The merger of the two companies will lead to the growth of this small company by increasing the economic demand. Hershey Company will benefit from diversification. The risks of investments spread by adding other sectors. Secondly, KONZA Company has a high liquidity. As the liquidity hypothesis stipulates, an increase in liquidity leads to an increase in in merger this is because it makes it possible for Hershey Company to acquire and finance the acquisition by use of resources (McDonald et al., 2006). KONZA Company faces a major threat of mismanagement of firm’s resources by managers to maximize the shareholders wealth. Therefore, if the two companies merge, the resources would effectively managed to maximize on the shareholders wealth as well as profit maximization of the company. I would finance the takeover by selling the company shares. This is by public invitation to buy the shares at premium from the shareholders of the company. This will enable the company to raise enough funds for growth and investments. My second choice would have been Texas Company because the company has a high debt that is attractive and not used. This will is an avenue to merge as low leverage reduces the default risk and increases the debt volume for the joint company (Vachon, 2007). The company investments have a positive net present value (NPV) meaning that it can invest in and gain profits. The two companies therefore can merge and invest in projects that yield profits, as it is a major goal of the company. This company could not be the first choice because it is a bit stable and does not suffer from liquidity and mismanagement of firms resources. My third company would be INOVA Company that is a stable company, operating under ongoing concern and is of large size. The company would merge with Hershey to benefit from synergies. The financial mathematics shows that the