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Transcription of this question: 6.Mega-dealsThe value Of international mergers and takeovers in 2006 was $3.5 trillion, even exceeding levelsduring the technology boom. This is globalization as never seen before: a borderless economy thatallows investment banks to fund takeovers from the four corners Of the earth.Acquiring firms are taking on debt when interest rates are historically low, seeking to gain theadvantages Of economies Of scale. The biggest global deal in 2006 was US-based, with Americantelecom giant AT&T buying competitor Bellsouth for $83 billion. The opening up Of Europeanmarkets by the competition authorities has set the scene for several mega-mergers. Even traditionallyprotectionist France failed to avoid the impact Of globalization, with Euronext, the country’s stockexchange operator agreeing to a $20 billion takeover by the New York Stock Exchange.The most important issue is whether mergers and takeovers actually deliver long-term value tothe business. Most surveys say they do not, although they enrich investment banks and managers.The future Often looks bright immediately after a merger or takeover, but the real results canonly be seen somewhere between one and three years later In reality, the market value Of halfOf the companies that were involved in mergers or takeovers had failed to keep up with theindustry index. This explains why de-mergers occur: years ago, BMW sold off Rover, to thegreat relief Of many shareholders and more recently Daimler untied its links with the loss-makingcarmaker Chrysler.[Source adapted from Observer, 24 Dec 2006, The Business, 23 Dec 2006 and http://www_dw-world_de, 27 Dec 2006](a)(b)(c)Define the term globalization.Explain the reasons why firms such as AT&T merge with, or takeover,Other firms.Discuss how important the external environment is in influencing the numberand size Of mergers and takeovers.[2 marks][8 marks][l O marks]

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