How high leverage is a reason for failure of merger? Explain. – InterviewSolution

1.	How high leverage is a reason for failure of merger? Explain.
Answer» The acquirer firm may decide to acquire the target through cash. To pay the price of acquisition, the acquirer may borrow heavily from the market. This creates a very high leveraged structure and increases the interest burden of the company. This increased interest cost may consume a big portion of the earnings and may lead to failure of the purpose of acquisition.

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