Misvaluation affect the failure of merger and acquisition activities Essay

Misvaluation affect the failure of merger and acquisition activities - Essay ExampleFor instance, Vishny (2003) states that misvaluation effects take an important role in market approaches in the short as well as in the long run since they are often determined by managerial optimism whereby the managers intend to satisfy their immediate financial benefits and this often leads to failure in the long run. Reasons such as such as differences in accounting principles, misvaluation of stocks and managerial approaches have been observed to be the main causes of failure of mergers and acquisitions. In some cases, organisations may be undervalued or overvalued but the truth of the social occasion is that markets are not static as they can change at any moment. The research methodology has been based on secondary research which rivet on the merger of Time Warner and AOL. The findings of the study show that this merger failed as a result managerial optimism whereby the CEOs of Time Warner and AOL used their overvalued stocks to merge their organisations. The managers assumed that their organisations result perform well in the future. Their assumptions were based on the notion that the trend will continue like that but that was not the case. Indeed, the internet Bubble that was so promising in the beginning but the trend later changed due to different market forces. It has been observed