This aspect of corporate strategy and top management style is the short route that is taken when there is a need to grow a business rapidly. Buying an existing business is definitely much faster than building a new business from the ground up. Reasons for the acquisitions can vary greatly depending on management objectives which could possibly include such ulterior motives as eliminating a business rival, gaining market share and the improbable concept of increasing financial leverage. Yes, firms often merge in order to increase financial leverage (the amount they can borrow based on their combined capital) by acquiring companies with little or no bank loans by using their improved cash flows.
Window Bank
The rationale of mergers or acquisitions is the synergy that is hopefully derived by combining both firms operations. However, some big much-publicized mergers failed to produce the much-anticipated value to their shareholders because sometimes cultures of the firms are very different and difficult to reconcile, resulting in management conflicts. The opposite direction of merger is divestiture where a firm sells a unit not consistent with its overall management strategy. Mergers can be friendly (by mutual consent) or hostile.
Yahoo and Microsoft