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Mergers & Acquisitions Essay Question: What are the primary options available to a failing firm? What...

Mergers & Acquisitions Essay Question:

What are the primary options available to a failing firm? What criteria might a firm use to select a particular option? Be specific.

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The primary option available to a failing firm is to try and improve their financial and business condition by merging with healthier competitors. In such cases the failing firm is most likely to exit the market if there are no merger options available in front of it. The alternate option is that the failing firm will go for liquidation of its assets. The value of a failing firm as an ongoing business, in future, will be less than its liquidation value and hence the next step will be to determine as to whether or not the failing firm should be kept alive. Economic and financial restructuring is another option available in front of a failing firm.

The criteria that a firm uses to select a particular option is to determine which one is the least distortive option and then select and pursue that option. Economic and financial reality is the primary criteria being used by firms to select a particular option.

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